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Son of Stark III -Is it soup yet? Presentation to
CBA Healthcare Section Brown Bag Series By
Jody Kepler
www.hro.com
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Son of Stark III Is it soup yet?

• The Basic Prohibition
• A physician cannot
• refer patients to an entity
• for the furnishing of DHS
• if there is a financial relationship between the
  referring physician (or an immediate family
  member) and the entity
• unless an exception applies

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Son of Stark III Is it soup yet?

• Referral
• Exceptions
• Pathologist for diagnostic lab tests and
  pathological exam services
• Radiologist for diagnostic radiology services
• Radiation oncologist for radiation therapy
• Services performed by the referring physician
• bonuses based on services personally performed

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Son of Stark III Is it soup yet?

• DHS annual list of codes
• designated health service categories included in
  the list of codes are  clinical laboratory
  services physical therapy services (including
  speech-language pathology services) occupational
  therapy services radiology and certain other
  imaging services and radiation therapy services
  and supplies
• http//www.cms.hhs.gov/PhysicianSelfReferral/11_Li
  st_of_Codes.asp

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Son of Stark III Is it soup yet?

• Phase I
• 66 Fed. Reg. 856
• Definitions
• General Exceptions
• In-Office Ancillary Services
• Physician Services
• Academic Medical Centers
• Others

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Son of Stark III Is it soup yet?

• Phase II
• 69 Fed. Reg. 16054
• Exceptions specific to ownership and investment
  relationships
• publicly traded securities, mutual funds,
  specific providers (rural)
• Exceptions specific to compensation relationships
• rental of office space, rental of equipment,
  employment relationships, personal service
  arrangements, physician recruitment, others

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Son of Stark III Is it soup yet?

• Phase III
• 72 Fed. Reg. 51012
• Stand in the Shoes
• Clarification to group practice
• relationships
• bonuses
• Physician recruitment exception relaxed

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Son of Stark III Is it soup yet?

• 72 Fed. Reg. 48434
• Stand in the shoes (10.1.08)
• Percentage based compensation (10.1.09)
• Per-click arrangements (10.1.09)
• Definition of entity (10.1.09)
• Investments through retirement plans (10.1.08)
• Information reporting

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Son of Stark III Is it soup yet?

• Stand in the Shoes
• 42 CFR 411.354(c)
• A physician who has an ownership or investment
  interest in a physician organization stands in
  the shoes of that physician organization
• exception physicians with no right to receive
  the financial benefits of ownership (profits,
  dividends, proceeds of sale)

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Son of Stark III Is it soup yet?

• Stand in the Shoes
• CMS permits a physician who is not an owner or
  investor in his physician organization to stand
  in the shows of the physician organization for
  purposes of applying the compensation exceptions
• Allows arrangements that were restructured under
  Phase III to continue in compliance
• CMS believes that complying with direct
  compensation exceptions will curtail abuse
• CMS did not finalize the entity stand in the
  shoes

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Son of Stark III Is it soup yet?

• Percentage-Based Compensation
• 42 CFR 411.357(a), (b), (l) and (p)
• CMS is taking a targeted approach to its primary
  concerns regarding percentage based compensation
  (stay tuned, CMS may further restrict in future
  rule making)
• Prohibits the use of percentage-based
  compensation formula in the determination of
  rental charges for lease of office space and
  equipment

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Son of Stark III Is it soup yet?

• Percentage-Based Compensation
• Not affected
• management and billing services
• Example - A business that wants to provide space
  and equipment to a physician organization and
  manage that physician organization. How to
  structure? What incentives can the business
  provide to the doctors?

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Son of Stark III Is it soup yet?

• Per-Click Arrangements
• 42 CFR 411.357(a)(5), (b)(4), (l) and (p)
• prohibits per-click payments to physician lessors
  for services rendered to patients who are
  referred by the physician lessor
• (example - physicians purchase equipment and
  lease it to a clinic to which the physician
  refers patients)
• Lithotripsy, not DHS, but can create a
  compensation relationship

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Son of Stark III Is it soup yet?

• DHS Entity
• 42 CFR 411.351
• Includes the entity that performs the DHS, as
  well as the entity that bills for the DHS
• Affects under arrangements
• Example Effectively moving a department outside
  of a hospital

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Son of Stark III Is it soup yet?

• Retirement Plans
• Clarification
• Exclusion from the definition of ownership or
  investment interest applies only to an interest
  in the physicians employer

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Son of Stark III Is it soup yet

• Information Reporting
• A physician-owned hospital
• shall furnish to patients, upon request, a list
  of physicians or immediate family members who own
  or invest in the hospital
• shall require all physician owners and investors
  who are also members of the medical staff to make
  a written disclosure of such interest to patients
  that they refer to the hospital

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Son of Stark III Is it soup yet?

• Conclusion
• Recommend to clients that they
• Inventory existing arrangements
• Modify where necessary for compliance
• Be prepared to discuss the new reality
• with clients who want to push the
• envelope

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Son of Stark III Is it soup yet?

• Thank you for your attention.
• Questions?
• Jody Kepler
• 303.866.0331
• jody.kepler_at_hro.com
• Holme Roberts Owen LLP
• 1700 Lincoln Street, Suite 4100
• Denver, Colorado 80203-4541