Stricter Self-Referral Rules Under Stark May Bring an End to Some Physician-Hospital Contracts

Major changes to the federal anti-self-referral rules known as the Stark law take effect October 1, 2009.  These changes were approved over a year ago, and could potentially cause many physician-hospital arrangements to fall out of compliance if doctors are not prepared. Lack of knowledge of the Stark law revisions or the structure of a particular agreement will not excuse physicians from liability.

The changes to the Stark law make it much more difficult for physicians and other entities providing designated health services to enter into joint ventures around hospital services. Stark is a strict-liability statute, so even if physicians have innocent intentions, they are still subject to penalties for violating the statute.

The Stark law generally prohibits physicians from referring patients to entities in which they have a financial stake, although there are several exceptions to the rule. In August 2008, the Centers for Medicare & Medicaid Services (“CMS”) issued a final rule making broad revisions to the Medicare hospital inpatient prospective payment system that will restrict:

• So-called “under arrangements,” where hospitals contract with physician-owned entities to provide a broad range of ancillary services, such as clinical labs or imaging services.
• Per-use or “per-click” payments for equipment and space leases.
• Compensation deals based on a percentage of revenue generated by space or equipment use.

The changes were delayed one year from the original October 1, 2008, implementation date.

In order to comply with the changes to the Stark law, physicians will need to restructure contracts to narrow the scope of services they perform for a hospital.  For example, a physician-owned entity may need to limit its clinical services but still could conduct billing and management activities.

How Should Physicians Prepare for the Stark Changes?

Here are some steps physicians can take to ensure compliance with the rules taking effect October 1, 2009:

• Consult an attorney to determine whether current hospital joint ventures or space and equipment leases will continue to be compliant with Stark.
• Review contracts for clauses that allow parties to amend or dissolve agreements as a result of changes in the law. Be sure to include such clauses in future contracts.
• Consider restructuring existing deals to limit the scope of services provided or to take advantage of other applicable safe harbors. In some instances, physicians may be forced to unwind the arrangements.
• Make sure any changes to compensation reflect fair market value.
• Review any state self-referral laws.
• Make any changes to agreements in writing.

© 2009 Parsonage Vandenack Williams LLC

  For more information, contact info@pvwlaw.com

AMA ANNOUNCES ENHANCED ELECTRONIC PRESCRIBING LEARNING CENTER

Earlier this year, the American Medical Association (“AMA”) established a new online learning center to provide physicians with the information and tools that they need to make well-informed decisions about electronic prescribing (“ePrescribing”).  Now, the AMA has introduced additional enhanced tools for ePrescribing. 

The learning center offers many tools and resources to help physicians, including calculators to estimate time savings and eligibility for incentive payments as well as planning devices to help assess practice readiness for and ease implementation of new technologies.  Examples of some of the new tools include:

• A system finder tool that picks three systems for a user based on the user’s response to a brief survey
• Side-by-side comparisons of up to three sPrescribing vendors at one time
• The ability to view vendor feedback and ratings from other users, and the ability to provide one’s own feedback
• Automated capability to contact a vendor when a decision is reached

The site and its resources can be accessed by physicians and others at http://www.ama-assn.org/ama/pub/eprescribing/home.shtml.

© 2009 Parsonage Vandenack Williams LLC

  For more information, contact info@pvwlaw.com

Practice Management Tips for Physicians

1.  Have Contracts with Third Parties Reviewed and Have a Policy about who is authorized to sign contracts.  Permit only managing physicians to sign contracts… of any kind. This is often overlooked on simple things like a new photocopier.  The receptionist signs a contract without realizing the ramifications.  No one reviews it. No one realizes the term of the agreement.   Some agreements require the practice to notify the vendor of termination to avoid an auto renewal.  Designate someone to know the details of the office lease, the leases for the office equipment and any and all such agreements.  Track renewal terms.   On at least a quarterly basis, review the list of contracts and determine how to handle any upcoming renewals.

2.  Exercise care in selecting retirement plan investment managers.  While many CPA firms do a great job in managing retirement plan assets, we advise practices to keep the practice accounting functions and the plan investment management separate.  Use an independent accountant who is paid for accounting services and not compensated for the sale of financial products to you. 

3.  Know exactly what you are paying to any and all advisors.  While many clients dislike the bills from hourly or flat fee advisors, at least it is clear how much you are paying.  Avoid giving into the psychology of feeling like you didn’t have to pay anything because a commission came off the top and you didn’t have to write a check. There is a reason for the shift to administrative and investment expenses being paid from  plans and/or off the top.  You pay more but you feel like you paid less. Always be clear about cost.   If you are writing a check for health insurance premiums, you are paying a commission.  Do you know how much it is? 

4.  Protect yourself from medical malpractice lawsuits.  Review your malpractice insurance for the best possible coverage.  Make yourself as judgment proof as possible.  Real estate, furniture and equipment should not be owned by the medical practice.  Use another entity to own valuable assets.  The assets can then be leased to the medical practice, making them less accessible to a malpractice claimant.  Each physician should engage in personal creditor protection planning.  If you are sued for medical malpractice, keep in mind that the attorney representing you works for and is paid by your insurance carrier.  Most of the time, that works well but there are circumstances where you should engage an independent lawyer.  At a minimum, keep the practice’s business lawyer in the loop on any medical malpractice suits.   Of course, the best protection is to adopt top notch practices and policies for risk management so that suits are avoided in the first place.

5.  Maintain and regularly review insurance coverage for the practice.  We often find clients do not have sufficient protection for such things as employee theft or unowned automobile liability.  Review and consider all optional coverages. 

6.  Adopt policies and procedures that ensure compliance with all applicable medical laws.  While it is likely not necessary to engage in an exorbitantly expensive compliance audit, periodic reviews of billing procedures, patient file documentation and third party financial arrangements should be conducted by a trusted advisor with appropriate skills and experience.   Consultants should be hired through your lawyer so that any reports provided stay as confidential as possible pursuant to the attorney client privilege.

7.  Review the practice compensation plan.  Be certain that the plan complies with Stark and all applicable regulatory rules.

8.  Review your malpractice insurance coverage and be certain that you are maintaining adequate limits.

9.  Review the structure of your retirement plan.  Physician plans can readily be designed in a way that avoids most testing requirements and reduces administration costs while allowing physicians to maximize their contributions to the plan.

10.  Review and update the agreements between the partners.  Unfinished or archaic agreements are a recipe for disaster when one of the group members experiences a life changing event.  What happens when a physician becomes disabled? Dies? Becomes a drug addict? Has an affair with a nurse?

 

© 2009 Parsonage Vandenack Williams LLC

  For more information, contact info@pvwlaw.com