Relationships with Physicians Stark Law Update Relationships with

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Relationships with Physicians – Stark Law Update

Relationships with Physicians – Stark Law Update

Relationships with Physicians – Stark Law Update Michael P. Davidson Click here to type

Relationships with Physicians – Stark Law Update Michael P. Davidson Click here to type Lewis Rice LLC transitional slide title. Greater St. Louis Area Chapter – Missouri Association of Medical Staff Services Summer Conference – July 29, 2016

Financial Relationships with Physicians – In General · Highly regulated · Penalties for violations

Financial Relationships with Physicians – In General · Highly regulated · Penalties for violations can be severe · Two Federal laws are directly implicated o Stark Law o Anti-Kickback Statute · Tax-exemption principles also implicated

The Stark Law · Prohibits referral by physicians of certain “designated health services” payable

The Stark Law · Prohibits referral by physicians of certain “designated health services” payable by Medicare or Medicaid to entities with which they or an immediate family member have a financial relationship · Implicated by any arrangement between a hospital or other entity and a physician in which something of value is exchanged · Can be an ownership/investment interest or a compensation arrangement · No finding of an intent to violate the law is necessary

Stark Law Penalties · The entity receiving the referral may not submit claims for

Stark Law Penalties · The entity receiving the referral may not submit claims for any services referred by the physician · Any payments collected must be refunded · Knowingly retaining reimbursement for impermissible claims can be grounds for liability under the False Claims Act

What is a Financial Relationship? · Ownership/investment interest or compensation arrangement · Can be

What is a Financial Relationship? · Ownership/investment interest or compensation arrangement · Can be direct or indirect · Indirect – Between the referring physician (or immediate family member) and the entity furnishing the referred service there is an unbroken chain of persons or entities that have financial relationships between them · “Immediate family member” is defined very broadly · Physicians “stand in the shoes” of their physician organizations · Recent clarification: All physicians in a physician organization are considered parties to a compensation arrangement for all purposes except signature requirements

Ownership or Investment Interests · Equity or debt · Includes an interest in an

Ownership or Investment Interests · Equity or debt · Includes an interest in an entity that holds an ownership or investment interest in the entity that furnishes the referred service · Stock, most stock options, partnership shares, limited liability company memberships · Loans, bonds, or other instruments that are secured with all or a portion of an entity’s property or revenue

Compensation Arrangements (1) · Any arrangement involving remuneration between a physician (or an immediate

Compensation Arrangements (1) · Any arrangement involving remuneration between a physician (or an immediate family member) and the entity furnishing the referred service · “Remuneration” is any payment or other benefit, made directly or indirectly, overtly or covertly, in cash or in kind · Recent clarification: Physician’s use of hospital resources when treating hospital patients not remuneration when hospital bills for its technical services and physician bills for his or her professional services · If hospital and physician submit a global bill to a payer and then hospital pays physician for professional services, then relationship involves remuneration

Compensation Arrangements (2) · Salary · Contractor or consulting fees · Research grants ·

Compensation Arrangements (2) · Salary · Contractor or consulting fees · Research grants · Honoraria, awards · Gifts or favors that are not insubstantial · Receipt of equipment or supplies

Compensation Arrangements (3) · Interests in intellectual property (e. g. , patents, trademarks, copyrights,

Compensation Arrangements (3) · Interests in intellectual property (e. g. , patents, trademarks, copyrights, or licensing agreements · “Under arrangements” agreements with hospitals · Stock options or convertible securities received as compensation prior to exercise or conversion · Unsecured loans subordinated to a credit facility · Security interests in equipment sold to a hospital financed through a loan by a physician · Bribes, kickbacks

Exceptions (1) · This law would prohibit many kinds of relatively innocuous business arrangements

Exceptions (1) · This law would prohibit many kinds of relatively innocuous business arrangements · Numerous exceptions to the law’s broad prohibitions have been created · Can shield an arrangement from penalties

Exceptions (2) · 37 Stark Law exceptions · Two new exceptions as of January

Exceptions (2) · 37 Stark Law exceptions · Two new exceptions as of January 1, 2016 · Each exception has multiple requirements · Arrangement must meet every requirement of the Stark Law exception · Certain technical requirements relaxed and certain matters clarified through Final Rule effective January 1, 2016

Common Scenarios · Medical staff incidental benefits · Nonmonetary compensation · Compliance training ·

Common Scenarios · Medical staff incidental benefits · Nonmonetary compensation · Compliance training · Professional courtesy · Charitable donations by a physician · Bona fide employment relationships · Personal service arrangements · Lease of office space or equipment

New Exceptions · Final Rule effective January 1, 2016 established two new Stark Law

New Exceptions · Final Rule effective January 1, 2016 established two new Stark Law exceptions · Recruitment and Retention of Non-Physician Practitioners · Time-Share Arrangements

Medical Staff Incidental Benefits (1) · Items or services from a hospital to a

Medical Staff Incidental Benefits (1) · Items or services from a hospital to a member of the medical staff for use on the hospital’s campus are permissible if requirements are met · Does not include cash or cash equivalents · Benefit must be offered to all medical staff members of the same specialty · Does not necessarily need to be accepted · Benefit must not be offered in a manner that takes into account the volume or value of referrals or other business generated between the parties

Medical Staff Incidental Benefits (2) · Benefit must be provided only during periods when

Medical Staff Incidental Benefits (2) · Benefit must be provided only during periods when the medical staff members are making rounds or are engaged in activities that benefit the hospital or its patients · Except for identification of medical staff on hospital Internet site or hospital advertising · Benefit must be used by the medical staff members only on the hospital's campus · Internet access, pagers, two-way radios, used away from campus only to access hospital medical records or information or to access patients or personnel who are on campus count as “on campus”

Medical Staff Incidental Benefits (3) · Benefit must be reasonably related to the provision

Medical Staff Incidental Benefits (3) · Benefit must be reasonably related to the provision of, or designed to facilitate delivery of, medical services at the hospital · Each occurrence of the benefit must be of low monetary value (less than $33 in 2016 calendar year) · Benefit cannot take into account the volume or value of referrals or other business generated between the parties · Arrangement must not violate the Anti-Kickback Statute or any rule governing billing or claims submission · Any facility with a bona fide medical staff may provide these incidental benefits

Nonmonetary Compensation (1) · Items or services may be provided to physicians · Does

Nonmonetary Compensation (1) · Items or services may be provided to physicians · Does not include cash or cash equivalents · Cannot be determined in a manner that takes into account volume or value of referrals or other business generated by the referring physician · Cannot be solicited by the physician or physician’s practice · Including employees and staff members · Arrangement cannot violate the Anti-Kickback Statute or any rules governing billing or claims submission

Nonmonetary Compensation (2) · If excessive nonmonetary compensation inadvertently provided, it is deemed to

Nonmonetary Compensation (2) · If excessive nonmonetary compensation inadvertently provided, it is deemed to be within the limit if: · Value of excess benefit is no more than 50% of the limit, and · Physician returns the excess benefit (or an amount equal to the value of the excess benefit) by end of calendar year in which excess benefit was received or within six months following date excess benefit was received, whichever is earlier · Entity can only rely on this procedure once every 3 years with respect to the same physician

Nonmonetary Compensation (3) · Annual aggregate limit is $392. 00 for 2016 calendar year

Nonmonetary Compensation (3) · Annual aggregate limit is $392. 00 for 2016 calendar year · In addition to benefits up to this limit, entity with a formal medical staff may provide one local appreciation event per year for entire medical staff · Any gifts or gratuities given in connection with event are subject to the annual aggregate limit

Compliance Training · Compliance training may be provided to a physician (or his/her office

Compliance Training · Compliance training may be provided to a physician (or his/her office staff) who practices in the local community or service area · Training must be held in the local community or service area · “Compliance training” means: · Training on basic elements of a compliance program (establishing policies and procedures, training staff, internal monitoring, reporting) · Specific training on Federal and State health care programs (billing, coding, reasonable and necessary services, documentation, unlawful referral arrangements) · Training on other Federal, State, or local laws, regulations, or rules governing the conduct of the party to whom training is provided · Includes programs that offer CME credit, so long as compliance training is the primary purpose of the program

Professional Courtesy · An entity with a formal medical staff may offer free or

Professional Courtesy · An entity with a formal medical staff may offer free or discounted health care items or services to a physician or a physician's immediate family member or office staff · Professional courtesy must be offered to all physicians on the bona fide medical staff or in the local community or service area, and the offer may not take into account volume or value of referrals or other business generated between the parties · Health care items and services provided must be of a type routinely provided by the entity · Entity must have a written professional courtesy policy approved in advance by its board · Professional courtesy may not be offered to a physician who is a Federal health care program beneficiary, unless there has been a good faith showing of financial need · Arrangement cannot violate the Anti-Kickback Statute or any rule governing billing or claims submission

Charitable Donations by a Physician · Bona fide charitable donations made by a physician

Charitable Donations by a Physician · Bona fide charitable donations made by a physician to an entity are permissible if all requirements are satisfied · Donation must be made to recognized tax-exempt organization · Donation must not be solicited or offered in a way that takes into account volume or value of referrals or other business generated between physician and entity · Donation arrangement may not violate Anti-Kickback Statute or any rule governing billing or claims submission

Employment Relationships · Employment must be for identifiable services · Compensation must be consistent

Employment Relationships · Employment must be for identifiable services · Compensation must be consistent with fair market value and cannot take into account volume or value of referrals · Compensation would be commercially reasonable even if no referrals were made · Productivity bonus permissible if based on personallyperformed services

Personal Services Arrangements · Common examples · Medical directorships · On-call coverage arrangements ·

Personal Services Arrangements · Common examples · Medical directorships · On-call coverage arrangements · Professional services agreements · Clinical research agreements · Clinical co-management / centers of excellence · Gainsharing · Pay-for-quality / pay-for-performance

Personal Service Arrangements · There must be a signed agreement that specifies all the

Personal Service Arrangements · There must be a signed agreement that specifies all the services · New rule: 90 days to obtain missing signature, whether failure to obtain signature was inadvertent or not · Recent clarification: Parties do not need one written contract · Aggregate services may not exceed those that are reasonable and necessary for legitimate business purposes · Term must be for at least one year · Recent clarification: Arrangement does not need to include explicit one-year term provision, but must show arrangement in fact lasted at least one year · Compensation must be set in advance, may not exceed fair market value, and may not take into account volume or value of any referrals · Services may not involve an arrangement that violates any law

Lease of Office Space · There must be a signed agreement that specifies the

Lease of Office Space · There must be a signed agreement that specifies the leased premises · Term must be at least one year · Space leased may not exceed what is reasonable and necessary for legitimate business purposes · Agreement would be commercially reasonable even if no referrals were made · Tenant must use the leased space exclusively, except for common areas if the rent does not exceed the tenant’s pro rata share of expenses

Lease of Office Space (Rent) · Rent must be set in advance and be

Lease of Office Space (Rent) · Rent must be set in advance and be consistent with fair market value · Rent may not take into account the volume or value of any referrals or be based on: o A percentage of revenue raised, earned, billed, collected, or otherwise attributable to business in the space o Per-unit of service charges, if based on services provided to patients referred by the landlord to the tenant

Lease of Equipment · Requirements for equipment leases are the same as those for

Lease of Equipment · Requirements for equipment leases are the same as those for space leases under Stark Law · “Fair market value” is value of equipment when obtained from a manufacturer or professional distributor · Same issue for space leases – fair market value is value of rental property for general commercial purposes

Recruitment/Retention of Non-Physician Practitioners (1) · New exception to allow recruitment assistance to physicians

Recruitment/Retention of Non-Physician Practitioners (1) · New exception to allow recruitment assistance to physicians to assist with employment of non-physician practitioners (“NPPs”) · Physician assistants, nurse practitioners, clinical nurse specialists, certified nurse midwives, clinical social workers, clinical psychologists · Recognition of significant changes in health care system and continued projected shortages in primary care workforce · New exception protects arrangements in which physician retains some of the compensation provided by hospital, federally- qualified health center (“FQHC”), or rural health clinic (“RHC”)

Recruitment/Retention of Non-Physician Practitioners (2) · Hospital, FQHC, or RHC may pay remuneration to

Recruitment/Retention of Non-Physician Practitioners (2) · Hospital, FQHC, or RHC may pay remuneration to physician to assist in hiring of NPP as employee or independent contractor · “Substantially all” patient care services provided by NPP must be primary care or mental health services · Services must be provided in geographic market served by hospital, FQHC, or RHC · Same physician may receive assistance only once every 3 years · Limits on assistance: two years and 50% of NPP compensation

Time-Share Arrangements (1) · Many entities in time-share arrangements with physicians have relied on

Time-Share Arrangements (1) · Many entities in time-share arrangements with physicians have relied on existing office space lease exception · But that exception requires exclusive use of space by tenant · Challenging to meet this requirement in time-share arrangement · CMS recognizes that time-share arrangements can serve important role, especially in rural or underserved areas · New Stark Law exception for arrangements between a physician and a hospital or a physician organization of which he or she is not an owner, employee, or contractor

Time-Share Arrangements (2) · Exception includes elements from existing office lease exception · Premises,

Time-Share Arrangements (2) · Exception includes elements from existing office lease exception · Premises, equipment, personnel, items, supplies, and services covered by arrangement must be used predominantly for provision of E&M services to patients and on same schedule · Equipment covered by arrangement must be located in same building and used only incident to physician’s E&M services · Equipment cannot include advanced imaging equipment, radiation therapy equipment, or clinical or pathology lab equipment (other than CLIA-waived lab tests)

Disclaimer · The materials presented in the preceding slides are a general description of

Disclaimer · The materials presented in the preceding slides are a general description of laws and regulations implicated by financial relationships between physicians and other health care entities. They are not intended to be, and should not be used as, a substitute for legal advice regarding particular financial arrangements. · If you have questions or need assistance, please contact Mike Davidson at Lewis Rice LLC.

Relationships with Physicians – Stark Law Update Michael P. Davidson Lewis Rice LLC mdavidson@lewisrice.

Relationships with Physicians – Stark Law Update Michael P. Davidson Lewis Rice LLC [email protected] com (314) 444 -7873 July 29, 2016