No more referrals from hospital physicians? The time may be near
No more referrals from hospital physicians? The time may be near
HCFA ponders controversial interpretation of pre-Stark law
What would your agency do if it could no longer accept referrals from physicians with a significant ownership in your hospital, even if those referring physicians had no financial ties whatsoever with your home care agency? With the Baltimore-based Health Care Financing Administration (HCFA) considering interpreting a 1982 law to mean just that, hospital-based home care agencies across the country could lose big.
HCFA is examining the home health agency physician certification law 42 CFR 424.22, which prohibits physicians with a "significant ownership or significant contractual relationship" in a home health agency from certifying or recertifying home health care plans to that agency. "Significant ownership" is defined as a 5% or more ownership interest. "Significant contractual relationship" is defined as business transaction(s) including employment that totals more than $25,000, or 5% of the total operating expenses of the home health agency, whichever is less. Recent HCFA interpretations, however, have stretched the connection to prevent physicians with significant ownership interests in the parent hospital from referring clients to the home health agency.
It’s likely at least some of the hospital physicians referring work to your agency meet these standards and, until recently, were doing nothing wrong. But that could change.
What’s the latest?
Just how close is HCFA to resolving the issue? That depends on whom you speak with. But there’s no shortage of opinions. Some, such as Sally A. Rosenberg, JD, partner, McDermott, Will & Emory, Washington, DC, expect an announcement shortly, although no one, HCFA officials included, knows exactly when that may be. On the other hand, there are those who wouldn’t be surprised to see the entire issue put on the back burner for the time being.
"We have been told that HCFA intends to put on hold the interpretation they had given earlier this year, but when we’ll see that I don’t know," says J.D. Epstein, JD, partner, Vinson & Elkins, LLP, Houston. "I think eventually what they’ll do is amend the regulation or appeal the regulation and allow Stark II to cover the situation." (See story, p. 110, for what this means to you).
Stark II includes home health services in the category of designated health services and thus does not attribute to the home health agency a transaction between a hospital and a physician that has no relationship with the home health agency.
According to HCFA, there’s no resolution in sight, at least not in the near future.
"There is no specific timetable," says Tom Hoyer, director, Office of Chronic Care Policy, HCFA. He was hoping to get the issue into HCFA’s clearance process by the end of August, which would be the first step in getting an official interpretation from the agency. Once the process begins, however, the agency has no set time frame for reaching a conclusion on the issue.
How HCFA will rule on this interpretation whether it limits referrals from physicians with a substantial interest in the home care agency or the hospital itself is anyone’s guess. Just as important, however, is whether HCFA will apply the new interpretation retroactively. If HCFA lets Stark II control such situations, the point is moot. If not, and HCFA looks at where hospital-based agencies have received referrals since the regulation was enacted in 1982, many agencies could be in trouble.
The problem is, if the application of that interpretation is applied retroactively, it could end up producing things such as monetary penalties and federal false claims problems, warns Epstein. It is a major problem and a major issue.
Hoyer makes two points on the issue: "First, we are continuing to ponder how to coordinate those laws with the Stark provisions. In the meantime, we are continuing to enforce it as before."
And how was that, you ask? In effect, not at all.
"We had assumed absent any noise to the contrary that people were in compliance," says Hoyer. "We had been planning in any event to coordinate it with Stark, but we received some questions around last Christmas, so the issue has come up a little prematurely for us."
Regarding the potential for retroactive enforcement of the issue, Hoyer speculates that HCFA will not enforce it retroactively. "I believe that if we change the interpretation, we ll do it prospectively."
How did this all begin? After more than a decade without problems, infighting between freestanding and hospital-based agencies seems to have prompted this latest battle.
"It appears some of the freestanding home health community realized last year that if this regulation was interpreted more strictly, it could cut down on the amount of hospital home health activity, so they generated some questions to HCFA. It was through HCFA’s responses that this new interpretation of the old law came out," says Rosenberg.
"Some of this is competition between freestanding home health agencies and hospital-based home health agencies," adds Epstein.
Freestanding agencies felt hospital-based agencies had a competitive advantage when allowed to receive referrals from hospital physicians meeting the significant ownership criteria for the hospital. As a result, according to Epstein, freestanding agencies began a push to have the regulation interpreted so hospital-based agencies could no longer receive referrals from physicians with a significant ownership in the hospital and not just the agency.
When HCFA’s interpretation was released early this year in a letter responding to a public inquiry, many were taken by surprise.
"Until this year, I don’t think anyone ever interpreted this regulation to apply in a situation where the physician was not directly employed or compensated by a home health agency," notes Epstein.
HCFA is now debating whether it will stand by its interpretation offered last February in the letter or if it will allow the status quo to remain intact. As the number of hospitals with home health agencies skyrockets, hundreds if not thousands of agencies stand to take a direct hit pending HCFA’s interpretation.
Vinson & Elkins submitted a paper to HCFA recently "in which we stressed the problems their interpretation was causing the industry," says Epstein. The firm is attempting to meet with HCFA officials on the matter.
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