It’s always a good idea to keep close track of your hospital and/or system’s contractual relationships with its physicians, but the issue takes on fresh urgency in light of recent changes to the Physician Self-Referral Law, better known as Stark. Failure to comply with Stark can have devastating financial consequences for both the organization and its physicians.
The Centers for Medicare and Medicaid Services (CMS) has announced that it will collect information about financial relationships with physicians from 500 acute care and specialty hospitals of all sizes. The purpose of the “Disclosure of Financial Relationships Report” (DFRR) is twofold: First, to identify arrangements that may not comply with the Stark law; and second, to identify practices that may be subject to future rule-making. The agency has indicated that one of those future rules may specify the periodic use of DFRR or another similar data collection instrument on a regular basis.
All of this is especially compelling because of the new Stark “Period of Disallowance,” which went into effect October 1, 2008.
Period of Disallowance
As defined in the FY09 Inpatient Prospective Payment System Rule, the Stark Period of Disallowance refers to the period of time for which a physician cannot refer designated health services (DHS) to an entity and the entity cannot bill Medicare, because a financial relationship between the referring physician and the entity failed to satisfy all of the requirements of an exception to the Stark self-referral prohibition.
This means that hospital and physician business arrangements found to be in violation of Stark not only need to be corrected, but also require the parties to:
- Correct any past direct costs/fees associated with deficiencies, such as undercharged rent, overpaid fees, and unpaid loans
- Disclose the violation to CMS.
- Pay Medicare back for any services billed while in violation.
- Pay any civil penalties that may be assessed.
This new rule makes it clear that simply fixing the financial relationship on a prospective basis would not end the disallowance period. Moreover, a Stark violation could not be eliminated merely by correcting the past over- or under-compensation and recovering or paying the difference; rather, this would merely enable the parties to end the Period of Disallowance so that the tainted referrals could be identified and calculated.
Given the 10/1/08 effective date on this rule, as well as the new disclosure report, hospitals would do well to consider conducting a full physician contracts compliance review as soon as possible.
What Your Organization Can Do
First, realize that if compliance concerns arise regarding a hospital-physician arrangement, CMS may make specific referrals to the HHS Office of Inspector General (OIG) or the Department of Justice. So while your compliance program should focus on Medicare and Medicaid fraud and abuse -- including but not limited to Stark, anti-kickback, and reimbursement matters – it should also look into other areas of concern to the OIG and other governmental agencies, for example:
- Antitrust issues
- HIPAA
- EMTALA
- Government contracting and reimbursement requirements
- Compensation arrangements with physicians
- Charity care
- Executive compensation
- Federal tax-exemption
Next, organize a compliance team to conduct the comprehensive physician financial relationship compliance audit and, as important, develop a corrective action plan. The team should:
- Identify and review all written and verbal arrangements between the hospital and physicians.
- Analyze statistical records of physicians’ referrals and identify potential referral sources.
- Review records of all financial or in-kind transactions between hospitals and physicians.
The corrective action plan should include recommendations regarding:
- Restructuring physician arrangements and joint ventures
- Drafting or revising compliance policies and procedures
- Developing educational modules
- Developing improved reporting relationships and accountability procedures
- Training appropriate personnel on new compliance protocols
- Disseminating new compliance policies and forms
As an outcome of the audit, you should have in place:
- Policies and procedures for implementing the new compliance plan.
- A binder of template contracts for common types of hospital-physician arrangements.
- An inventory of all hospital-physician arrangements.
Then, once the audit is completed, it’s time for restructuring:
- Develop unwind documents for arrangements that may no longer pass scrutiny.
- Restructure arrangements, as needed, to comply with Stark, the anti-kickback statute, and their state counterparts, if any.
Wait – You’re Not Done Yet
Before the compliance team disbands, there are a number of additional steps your hospital should seriously consider undertaking in the same time frame as the audit – in other words, now.
Train the individuals responsible for overseeing the compliance program in:
- specific areas of law in which the hospital has exposure
- communication of standards to the hospital’s officers and employees as required by the new guidelines
Develop written materials to help the trained individuals train other hospital staff.
Keep the governing board apprised of compliance efforts and activities.
Review your document retention policy to make sure it supports effective and ongoing implementation of the compliance program. The policy should address:
- Time periods for retention of various classifications of documents
- Document destruction procedures
- Guidelines to assure compliance with state and federal laws regarding destruction of documents relative to judicial, administrative, and legislative proceedings and investigations
- Guidelines specific to civil litigation
Prepare a HIPAA compliance program, to include:
- Performing compliance audits
- Conducting training programs for hospital personnel and HIPAA security and privacy officers
To work, these processes require not only an organized team effort but also collaboration and support from both administration and, of course, your physicians. In particular, the training program, communication strategy, evaluation of alternative alignment strategies, and design of appropriate corrective actions will be key to your fulfilling the Disclosure of Financial Relationships Report requirements.