- Designated Health Services The proposed regulations, unlike the Stark law, specifically define each item listed as a designated health service. The preamble states that a designated health service, even if subsumed within another category for billing purposes, would still be a designated health service for purposes of the prohibition. The example provided notes that services that are not generally considered designated health services, such as many skilled nursing facility services, would still be considered as such if it encompassed one of the designated health services defined in the proposed regulations. In essence, Stark II would prohibit the referral of designated heath services to an entity in which the referring physician has a financial interest, regardless of the setting in which such services were provided or the payment category under which they were billed.
- Financial Relationship The proposed regulations also clarify what HCFA considers to be a "financial relationship" between a referring physician and the entity to which he or she refers. A financial relationship occurs if a physician (or immediate family member) has a direct or indirect ownership or investment interest or a compensation arrangement with the entity. Simply because a physician refers patients to an outside entity, it does not create a financial relationship within the meaning of the Stark law if the physician meets the other requirements of the exception. Additionally, if these regulations are adopted, the term Nindirect ownership" would cover indirect interests in an entity that are several times removed from direct ownership (i.e., ownership of an entity that has an interest in another entity that has an interest in the entity that provides the designated health service). The preamble further reiterates that simply receiving a return on an ownership interest would not be considered a compensation arrangement prohibited by Stark II. However, this issue is unclear because an ownership interest is a financial relationship.
- Compensation Compensation arrangements are defined as any arrangement involving remuneration between the physician (or immediate family members) and an entity. This includes payment for non-medical items or services such as rent, as well as for medical items or services. Several exceptions to the compensation arrangement surround valuation of items or services based on fair market value. Fair market value is defined as compensation based on arms-length negotiations consistent with its general market value. The proposed regulations build on this definition of fair market value by defining general market value as the price which a transaction of like type, quality and quantity would bring in the particular market. Bona fide bargaining between well-informed parties would also be an essential element. For rentals and leases, additional requirements would still also have to be met under Stark II. For specifics on other proposed revisions affecting methods of compensating physicians, please see Part IV.
- Referral The preamble also attempts to alleviate any possible conflict that may arise from the statutory definition of the term "referral." The Stark law defines a referral as the request by a physician for an item or service for which payment may be made under Medicare Part B (whether or not Medicare actually honors such Part B claim). The term referral also covers the establishment of a plan of care by a physician that includes one or more designated health service. The regulations would limit the breadth of both sections of the statutory definitions to only those services which may be paid under Medicare Part B and which are also designated health services. In other words, only those designated health services which may be paid under Part B and only those items which may be paid under Part B which are also designated health services constitute prohibited referrals.
Furthermore, the proposed regulations would limit the definition of the term "referring physician' to only those individual physician-members (or their immediate family members) of a group practice who have a prohibited financial interest in the entity receiving the referral. Therefore, unless the member with the financial interest has the ability to exert control over the group practice, other members of the group practice may refer patients to that entity without coming under the prohibition in Stark law.
Clarifications of Designated Health Services and Other Definitional Clarifications Under the Regulations
This article was edited and reviewed by FindLaw Attorney Writers | Last reviewed March 26, 2008
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