Clarifying regulations from Stark II rules

Contract Language. By Steven M. Harris, amednews contributor. July 2, 2001.

CONTRACT LANGUAGE

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I receive numerous calls, letters and e-mails, typically inquiring about specific topics of interest discussed in previous issues. Following are a few such questions.

Remember that this column cannot serve as legal advice. Questions and answers are limited to discussions of general principles and should not be relied upon to resolve specific issues.

Question I read with great interest your article about ambulatory surgery centers (see column, May 7). I am part of a 13-member orthopedic specialty practice that is opening a single-specialty, surgeon-owned ASC. I am anticipating performing several procedures at the center that are not currently Medicare-approved ASC procedures. My question is: Can I become an investor although I do not meet the safe-harbor guidelines?

Answer Whether or not you can invest in the ASC would depend on its policies regarding investors, as well as an analysis of the fraud and abuse exposure that may arise under the federal anti-kickback statute and any relevant state law.

It does not appear that you will satisfy the ASC safe-harbor requirement that you receive at least one-third of your practice income from the performance of procedures appearing on the list of Medicare-covered procedures for ASCs. Failure to satisfy the safe harbor does not necessarily mean the investment is illegal or otherwise improper. But the investment terms as well as the structure and proposed business of the ASC would need to be reviewed to determine the level of exposure.

Question I read your article concerning how Stark II will affect doctors' pay (see column, Feb. 26). I am an attorney whose clients include an incorporated group of physicians who are considering buying an MRI. No decision has been made whether the corporation will own the MRI or create a limited liability firm to own it and lease it to the corporation. Can the physicians refer Medicaid or Medicare patients for an MRI or does their financial interest or relationship bar them from doing so?

Answer Stark II rules would apply to the Medicare/Medicaid referrals because of the doctors' financial interest. It may be possible, however, for the group to provide the MRI services under the in-office ancillary services exception to Stark II. The group would need to be structured to satisfy the Stark II group practice standards, and the services must satisfy the in-office ancillary services requirements relating to supervision, location and billing. Time-share arrangements for an off-site facility generally will not be allowed under the final Stark II rule.

Question I would appreciate your comments on Stark II applicability:

There are several companies now producing office-based bone density scan machines. It is usually a lease-based program paid on a per-scan basis. Will billing the patient's insurance the amount the company charges our office be in violation of Stark?

In a similar situation, there are mobile ultrasound companies that will let us rent equipment. They can come to the office to perform the test, and we can bill insurers for the technical component only. The physician who reads the study will bill his own professional component. Is there any problem with Stark?

Answer Stark II rules apply to Medicare and Medicaid referrals for "designated health services." Threshold issues include whether tests involve Medicare or Medicaid patients and whether bone density tests fall within the definition of "designated health services." Ultrasound tests for Medicare and Medicaid patients are generally covered under Stark II.

The arrangements would need to be structured to satisfy a Stark II exception, such as the in-office ancillary services exception, which applies to some referrals in a group practice. This would need to satisfy all other applicable laws, regulations and payer requirements, including those relating to supervision and billing, the federal anti-kickback statute, and safe self-referral and fee-splitting laws.

Harris, a partner at McDonald Hopkins in Chicago, concentrates on health care law and has counseled physicians, physician networks and health care groups nationally. The author and publisher are not rendering professional advice and assume no liability in connection with its use. He can be reached at 312-280-0111, or by email (sharris@mcdonaldhopkins.com).