Final regulations include significant changes
Health care attorneys who have spent the last two weeks pouring through the fine print of the final Stark II regulations are finding numerous changes and many improvements in the proposed rule.
Among the most important changes in the final rule are the use of CPT codes for some of the designated health services and the broadening of the group practice unified standard requirement from the proposed definition, says health care attorney Gregg Wallender of Hall Render in Indianapolis.
On the flip side, he says the Health Care Financing Administration (HCFA) narrowed the ability of health care entities to engage in certain nonabusive percentage arrangements. He says that some of the special rules on compensation, such as narrowing what type of percentage arrangements are allowable, will make some reasonable business arrangements more complex and others impossible.
Wallender also points out that HCFA has yet to promulgate regulations for two major categories of exceptions. The statute includes three categories of exceptions, he notes. The one pertaining to both ownership and compensation was covered in the published regulation. But the ones pertaining to ownership and investment interest and compensation arrangements were not, although new compensation arrangement exceptions were added.
"We still have two major categories of exceptions outstanding," he says. "But for the most part, many of those are pretty self-explanatory, so I think we will get by." On the other hand, a few significant areas are not in final form yet, such as physician employment, which probably is the most common occurrence.
Wallender says the safest way for providers to proceed is to go by the literal terms of the statute. "We still have HCFA’s commentary from the proposed regulations to guide us in those other aspects as well as the final regulations from Stark I," he adds. "Those three pieces of information are our best resources."
According to health care attorney Robert Homchick of Seattle-based Davis Wright, HCFA attempted to clarify the definitions for designated health services with some success. The agency also articulated a test for determining whether an indirect financial relationship will trigger the referral prohibition.
Likewise, HCFA also attempted to be more flexible in how group practices organize themselves in the in-office ancillary service exception, he says. But further study is required before it is clear whether the lines that have been drawn are practical.
HCFA also refined the definition of referral and excluded services originally performed by the referring physician. Homchick says that is important in the context of determining whether group practice compensation and other compensation are based on the volume and value of referrals.
The agency also added a new exception for academic medical centers that addresses the compensation of faculty in that context, as well as a risk-sharing exception for commercial and employer-sponsored managed care plans.
John Steiner, director of corporate compliance at the Cleveland Clinic Foundation, says the refinements in the final regulation add badly needed flexibility to the exceptions, particularly for compensation arrangements.
He says that is especially true since existing federal fraud and abuse statutes have common elements. In the past, when providers scrutinized Stark exceptions and safe harbor regulations, a mismatch in requirements often emerged. "Now they are more compatible with each other and much easier to interpret and apply consistently," Steiner contends. "That is very important."
According to health care attorney Charles Oppenheim of Los Angeles-based Akin Gump, the final rule includes good news for medical groups because it will make it somewhat easier to deal with certain requirements, such as supervision for ancillary services. He also applauds an exception for risk-sharing arrangements that could prove beneficial for providers, as well as the increased clarity for indirect compensation arrangements.
There is ample room to criticize many of the specifics, adds Oppenheim. "But there would be no way to write a rule that would make everybody happy," he concludes. "They have tried to balance competing interests, and I think they did a decent job."
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