Incentive plans in danger if Stark II law adopted
More exemptions needed
The impact could be significant on hospital-physician risk sharing arrangements if the proposed Stark II regulations are adopted by federal regulators in their original form, says Wendy Krasner, a health care specialist in the Washington, DC, law office of McDermott, Will & Emery.
For instance, hospital incentive payments to physicians under a Medicare or Medicaid managed care plan would cause referrals to those physicians to be illegal unless a exception is created, Krasner says.
The current Stark prepaid plan exception only covers referrals of patients enrolled in a Medicare or Medicaid managed care organization (MCO) — or a federally qualified HMO — to a hospital, "but does not protect referrals of other Medicare beneficiaries or Medicaid recipients who are the physician’s patients," she notes. However, these other referrals would be protected under the proposed Stark II regulations provided they recognized that incentive payments could be made by either the MCO itself, or an intermediate provider like a hospital that subcontracts with the MCO.
The proposed Stark II regulations also incorporate statutory exception for physician incentive plans recognized under the Social Security Act, notes Michael Blau, a partner in McDermott, Will & Emery’s Boston office. According to Blau, in the preamble to the proposed Stark II rule, HCFA states that under the regulations ". . . the incentive plan qualification applies only when the entity paying the physician or physician group is the kind of entity that enrolls patients, such as a health maintenance organization."
"HCFA apparently considered and then dismissed the implications of this restriction for direct hospital-physician risk sharing arrangements, as evidenced by its commentary in the preamble to the proposed rules regarding evolving structures of integrated delivery and other health care delivery systems,’" notes Blau.
Bottom line: Unless changed in the final Stark II rule, any hospital-physician risk sharing arrangement must meet the narrow definition in the Stark II proposed regulations of a physician incentive plan, Blau says. To comply, the arrangement would have to be structured so the organization in which the patients are enrolled — the HMO or other MCO — is the source of payment to the physicians participating in the risk-sharing arrangement.
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