Insights

Medicare Modifications and Updates to the IPPS Rule

On July 31, 2008, Centers for Medicare and Medicaid Services (“CMS”) issued the final Hospital Inpatient Prospective Payment Systems rule (“2009 Final Rule”) which was published in the August 19, 2008 Federal Register. Contained in the 2009 Final Rule are revisions to the regulations promulgated by the Stark Law (“Stark”). Specifically, the following sections list Stark areas containing key changes as part of the new regulations and summarize the modified rules:

• Per-Click Payments
  Payments to physician lessors are now prohibited for referrals to lessee DHS providers
  In the 2009 Final Rule, CMS solidified its position prohibiting unit-of service (or per-click) payments to physician lessors from DHS provider lessees. Although the effective date of the updated provisions will not occur until October 1, 2009, CMS is not grandfathering existing per-click arrangements; therefore, careful consideration to restructuring or unwinding of such leases must be given well in advance of that date.
• Percentage-Based Compensation
  Such compensation is now prohibited for office space and equipment but permitted for physician services
  Unexpectedly, CMS narrowed the scope of this prohibition since the publication of its proposed regulations. Specifically, CMS targeted the prohibition only for office space and equipment rentals. While CMS is not prohibiting percentage-based compensation for physician services or non-professional services (e.g., billing, management), its prohibition for office space and equipment take effect October 1, 2009.
• “Under Arrangements”
  Entities performing DHS are now restricted by Stark
  As part of the revisions, CMS finalized its proposals to restrict “under arrangement” transactions. Particularly, CMS sought to limit investments by referring physicians in entities that do not bill for DHS services, but provide them to hospitals “under arrangements.” While changes to the rules governing “under arrangements” will not become effective until October 1, 2009, cautious review and likely restructuring of many of these relationships will be necessary in advance of the effective date.
• “Stand in the Shoes”
  Physician owners stand in the shoes of their organizations
  Following public opposition to the 2009 Proposed IPPS rules, CMS confirmed that it is limiting the “stand in the shoes” concept to owners of physician organizations. The new rule, effective October 1, 2008, will include a grandfathering exception applicable to those arrangements put into place pursuant to the earlier regulations.
• Other
  In addition to the above-referenced provisions, CMS also made revisions to its rules pertaining to certain issues, including:
  • Ownership or investment interests (effective October 1, 2008) related to:
    • retirement plans;
    • Burden of proof; and,
    • Periods of disallowance.
  • Obstetrical malpractice insurance subsidies (effective October 1, 2008)
  • Reporting Hospital-Physician Financial Relationships

CMS is applying the Disclosure of Financial Relationships Report (“DFRR”), first mentioned in its proposed rules. Hospitals shall be required to use the DFRR in order to report their financial relationships with physicians.

If you would like more information, please contact the expert listed below at (800) 270-9629.