Medicare rules close loopholes for self-referral

October 3, 2008



Following its charge to reduce costly imaging overutilization, the Centers for Medicare and Medicaid Services has announced more stringent prohibitions against self-referral practices. Final Stark rules for the Hospital Inpatient Prospective Payment System for 2009 could force providers to restructure numerous space and equipment leasing arrangements.

The final IPPS rules, published in the Aug. 19 issue of the Federal Register, will become effective Oct. 1, 2009.

The implications for radiologists are positive. The new rules will remove incentives for self-referral and will make lease arrangements with imaging centers less attractive, said attorney Thomas W. Greeson, a partner in the law firm of Reed Smith LLP in Falls Church, VA, and regular contributor to Diagnostic Imaging.

"It will also mean that many of the arrangements where hospitals have been able to establish relationships with referring physicians based on ownership or leasing of services on a per-click basis will be less attractive and give radiologists the opportunity to be part of the technical component services that otherwise were provided under these various arrangements," Greeson said.

The new provisions broaden the definition of designated health services (DHS) "entities" and prohibit "under arrangement" partnerships between hospitals and physician groups and "per-click" arrangements (fees paid to a physician whenever a machine owned by that physician and leased to a hospital is used) for space and equipment leases.

Until now, only those healthcare institutions billing Medicare for DHS had been considered DHS entities under Stark rules. The final IPPS rule has expanded the definition to include any facilities that perform DHS, regardless of whether they bill CMS.

The old Stark rules prohibited physicians from referring patients to any facility in which they had a direct financial interest. The rules did, however, allow referring physicians to receive indirect compensation from hospitals to which they referred Medicare patients for imaging studies. Physicians benefited if they had a stake in a facility or entity that subcontracted its imaging services to such hospitals. The new Stark rules will make it impossible for referring physicians to enter such an arrangement.

The old rules also allowed for certain percentage-based or per-use payments to physicians for the lease of space and equipment. CMS has come to consider such payments an incentive to refer. The final Stark rule will no longer permit them. Lease arrangements in which the referring physician or the physician's practice is either a lessor or lessee are implicated by the new rule.

-By H.A. Abella