Percentage-based pay arrangements get a year's reprieve

Concern among doctors spurs CMS to review that portion of the Stark II rules.

By Tanya Albert, amednews staff. Dec. 24/31, 2001.

Hospitals and other medical institutions can continue to pay physicians who are independent contractors on a percentage basis without violating federal self-referral regulations, at least for the next year.

The Centers for Medicare & Medicaid Services in early December published a notice that delayed that portion of physician self-referral regulations that would prevent independent contract physicians from maintaining compensation arrangements in which their payment fluctuates based on a set percentage of the billings or collections. The regulations now won't take effect until Jan. 6, 2003. They were scheduled to take effect Jan. 4, 2002.

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"If physicians have percentage-based arrangements, they don't have to restructure them between now and Jan. 4," said William H. Maruca, a health care lawyer with Kabala & Geeseman in Pittsburgh. "This is something that was controversial."

Although doctors have a one-year reprieve, percentage-based arrangements still need to be based on fair market value.

CMS published the first part of physician self-referral laws -- commonly known as Stark II -- in January 2001. The regulation was named after its congressional sponsor, Rep. Fortney "Pete" Stark (D, Calif.).

For the most part, physicians were pleased with the results. But doctors were concerned about several areas, including the rules governing percentage-based compensation, which is a common way to bill.

A CMS spokesman said agency officials would spend the next year looking at the issue and the comments they received on the topic. "It could be changed," he said.

The percentage-based compensation arrangements were just one of the many issues addressed in the 600-page first installment of the regulation. The remainder of the rules are still set to take effect in January 2002.

The regulations primarily will affect physicians. They cover 10 services: physical therapy; occupational therapy; radiology; home health services; outpatient prescription drugs; radiation therapy services and supplies; durable medical equipment and supplies; inpatient and outpatient services; parenteral and enteral nutrients; and prosthetics, orthotics and prosthetic devices and supplies.

CMS is expected to publish the second part of the final regulations next year. Those regulations will primarily affect hospitals.