CMS issues interim final rule on self-referral

Mar 24, 2004

The U.S. Centers for Medicare and Medicaid Services (CMS) has issued the second phase of its final regulations addressing physician referrals to entities with which they have a financial relationship.

The interim final rule creates several new regulatory exceptions for non-abusive financial relationships.

The CMS has protected legitimate arrangements involving certain specialty groups that primarily furnish oncology and radiology services. In addition, it has revised the definition of compensation that is "set in advance" to permit certain common percentage compensation arrangements; made the academic medical centers exception more flexible; expanded the medical staff incidental benefits exception to include facilities other than hospitals; and expanded the exception for certain dialysis-related drugs to include more drugs used in connection with dialysis treatment.

The new regulation also revises the hospital ownership exception to reflect the new 18-month moratorium on physician ownership of specialty hospitals, which was recently enacted in section 507 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA 2003), said CMS

The agency has eliminated a proposed restriction on productivity bonuses, making it clear that physician employees may be paid bonuses on the basis of their personal productivity (but not referrals for ancillary services). The new regulations contain a new provision that deems certain hourly payments to physicians to be consistent with fair market value, a key requirement for most compensation arrangement exceptions. CMS also expanded the recruitment exception to apply to physician recruitment conducted by federally qualified health centers.

Lastly, the regulations create exceptions for Medicaid managed care plans; professional courtesy arrangements; certain inadvertent and temporary lapses in compliance with an existing exception; charitable contributions by physicians to entities that furnish designated health services; payments made by a hospital or FQHC to a physician to retain the physician's needed medical practice in a health professional shortage area; and technology items or services furnished to physicians to enable their participation in a community-wide health information system, according to CMS.

The new regulations will be published in the Federal Register on Friday March 26, and the effective date of the rule will be July 24 this year, said CMS.

By AuntMinnie.com staff writers
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