Archives: Ancillary Services

On December 18, 2013, Pennsylvania Act 122 amended the Pennsylvania Clinical Laboratory Act to, among other things, impose licensure requirements on out of state clinical laboratories and to place certain prohibitions on physician financial arrangements with labs.  Among other things, Act 122 prohibits the payment or receipt of commissions, bonuses, kickbacks or fee-splitting arrangements and prohibits laboratories from leasing office space, shelves or equipment within a physician’s office.  The Department of Health has now issued two rounds of “Frequently Asked Questions” regarding clinical laboratories and Act 122.  These FAQs can be found on the Department’s website here.  Physicians in Pennsylvania who have financial/contractual arrangements with clinical laboratories, whether those labs are located in Pennsylvania or in another state, should carefully review Act 122 and the FAQs to ensure that their arrangements are in compliance with these new requirements.

Many physicians I speak with are still surprised to learn that the federal Stark statute imposes restrictions on income division within group practices.  These restrictions only apply to profits generated from any of the Stark “designated health services” and only those that are covered by Medicare and Medicaid (including managed care), but if your group provides any of these designated services, the Stark income division rules apply to you and  penalties for failing to comply are steep.  )  Penalties for violating this statute include a $15,000 civil money penalty for each tainted referral and for each claim submitted pursuant to a tainted referral, as well as potential false claims liability.

Here are some of the basics (but realize that Stark is a complex and technical law so if you think this is an issue for your group, you should consult with a knoweldgeable health care attorney).  Stark designated health services include the following:

–clinical laboratory services;
–physical therapy services;
–occupational therapy services;
–radiology, including MRIs, CAT scans and ultrasound services;
–radiation therapy services and supplies;
–durable medical equipment and supplies;
–parenteral and enteral nutrients, equipment and supplies;
–prosthetics, orthotics, and prosthetic devices;
–home health services and supplies;
–outpatient prescription drugs; and
–inpatient and outpatient hospital services

Most physician group practices rely upon what is known as the Stark “in-office ancillary services exception” to legally permit them to refer to and bill for Stark designated health services within their practices.  One of the conditions of this exception is that the practice must meet Stark’s definition of a “group practice”.  And, group practices may only divide Stark profits in a limited number of ways.

Under Stark, physicians in a group practice may receive a share of the practice’s overall profits derived from the DHS of the group provided the share is not determined in any manner which is directly related to the volume or value of referrals by such physician.  The regulations define “a share of the overall profits” to mean a share in either all of the profits derived from the Stark services of the entire group or of any component of the group that consists of at least five (5) physicians.  This means that Stark DHS profits may be allocated among all physicians in the group or among subgroupings of no fewer than five (5) physicians – bu even then, the profits may not be allocated to individual physicians in a manner that reflects their referrals to the stark services.

The Stark regulators have provided the following examples of permissible income division formulas:

–per capita division of the overall profits (i.e., equally among all physicians in the group);
–based on the distribution of the group practice’s revenues attributable to services that are not Stark services payable by federal or private payors;
–Any distribution of Stark revenues if the group practice’s Stark revenues are less than 5% of the group’s total revenues, and no physician’s allocated portion is more than 5% of that physician’s total compensation from the group.

Physicians may also be paid productivity bonuses for personally-performed services (or incident to personally perfomed services) as long as the bonus is not directly related to the volume or value of referrals for Stark services by the physician.

Stark is a strict liability statute, so penalties will attach to a violative arrangement whether the violation was intentional or inadvertant.  Therefore, if you have not reviewed your income division formula for Stark compliance, you should do so without delay.

 

 

By Michael J. Coco

What providers and pharmacists don’t know about their employees can hurt them.  That’s the hard lesson learned by a New Jersey pharmacy that had no reason to think the pharmacy it purchased came with an experienced, licensed pharmacist employee with an unsuspected criminal background.  Providers should know that falsifying documents, records and applications is unethical and likely to have serious legal and civil consequences.  Last month, the New Jersey Appellate Division upheld a decision by the state’s Medicaid program to deny an application submitted by Township Pharmacy on the basis that the pharmacist submitted false information when it certified that none of the predecessor employees had criminal backgrounds.

The plaintiff in Township Pharmacy was an experienced pharmacist who purchased an existing pharmacy establishment and, in doing so, retained employees who were employed by the predecessor pharmacy.  One particular employee, B.L.R., was with the pharmacy for nine years, had recently undergone a background check, and was awarded a pharmacy license by the state.  The plaintiff had every reason to believe that B.L.R. had a criminal history.  When the State conducted an investigation, it discovered that B.L.R. did in fact have a criminal history and denied the plaintiff’s application for Medicaid participation.

On appeal, the Appellate Division upheld Medicaid’s decision, notwithstanding the fact that the plaintiff had a good-faith belief that none of his employees had criminal records.  In applying something of a strict liability standard, the court opined that the pharmacist’s failure to carry out his due diligence in conducting background checks resulted him submitting a “false” application to Medicaid.  Because Medicaid can deny an application based on false information submitted, the decision was upheld.

This case acts as a warning to both pharmacists and providers to conduct thorough due diligence after any entity purchase or merger.  Not only can Medicaid deny an application, but the Township Pharmacy ruling appears to allow a strict liability standard for any “false” application and the penalties for such falsification include suspension and disbarment from participating in any State contracting.  In other words, a good-faith error on a Medicaid application could result in a practitioner’s suspension or disbarment from Medcaid, New Jersey Family Care, or any other State program regardless of whether it is related to the Medicaid program.

The take-home point of Township Pharmacy is to conduct thorough due diligence, especially after a merger or acquisition.  The case also has strong implications for anyone purchasing a physician office and employing the physician owners.  Providers can guard against this concern by requiring physicians to disclose any prior criminal history when entering into an asset-purchase agreement, and allowing for termination and indemnification in the event that an undisclosed criminal history is discovered.  Providers may also wish to make a background check a prerequisite to the purchase of an entity.  Finally, providers should be mindful that other questions on Medicaid applications should be answered with care.

On June 29, 2011, the New Jersey Senate voted to pass Senate Bill No. 2780, which would amend existing New Jersey health care facility licensure statutes to require that one-room surgical practices operating in New Jersey obtain state licensure.  The term “surgical practice” is essentially defined to include any structure or suite of rooms that has no more than one room dedicated for use as an operating room, has one or more post-anesthesia care units or dedicated recovery areas and is established by a physician, physician-known entity or other professional practice for use by the physician’s private practice.

The bill, if passed, would impose various physical plant and functional requirements on one room surgical suites unless the entity is certified by the Centers for Medicare and Medicaid Services (“CMS”) as an ambulatory surgery center, but would exempt these entities from the New Jersey health care facilities tax assessment applicable to true ambulatory surgery centers.

According to a new report from the Pennsylvania Health Care Cost Containment Counsel (also known as PHC4), 19 new ambulatory surgery centers (ASCs) opened up in Pennsylvania in the past year. This bring the total number of ASCs in Pennsylvania to 262.  According to the report, ASCs generally remain profitable.

Although growth of ASCs means more independence for physicians and more choices for patients, acute care hospitals in the state are likely not thrilled with this news.  Undoubtedly lobbying pressure to stem the growth of outpatient centers will continue, so physicians who are considering investing in or developing an ASC should move quickly before Certificate of Need or other regulatory hurdles are put in place.

 

For physicians in the process of developing physician-owned hospitals, the race is on to get those facilities up and running by December, 2010. The recently enacted “Health Care and Education Affordability Reconciliation Act of 2010” amends the Stark law to once and for all prohibit physician-owned specialty hospitals unless: (1) the hospital has a Medicare provider agreement by December 31, 2010; and (2) was not converted from an ambulatory surgical center to a hospital after March 23, 2010. Hospitals grandfathered under the above provisions are prohibited from, among other things, expanding their physician ownership or the number of ORs or beds from what they were on December 31, 2010.
 

Among its many provisions, the newly signed Patient Protection and Affordable Care Act has imposed a new requirement on physicians who rely on the Stark "In-Office Ancillary Services" exception.  Physicians who refer patients for CT, MRI or PET (or other Stark services as designated by the Secretary of HHS) that will be provided by the referring physician’s practice under the Stark In-Office Ancillary Services exception must now inform the patient in writing at the time of the referral that the individual may obtain the services for which the individual is being referred from a person other than the referring physician’s practice, and provide the patient with a written list of suppliers (who furnish such services in the area in which such individual resides.

The provision in the new law has an effective date of January 1, 2010, so absent clarification from Congress or HHS, the above requirement is effective immediately. 

 

 

Under the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA), all Medicare suppliers of the technical component of advanced imaging services have until by January 1, 2012 to become accredited by an accreditation organization designated by the Secretary of Health and Human Services . This includes physicians, non-physician practitioners, and physician and non-physician organizations paid for the technical component of advanced imaging services under the Medicare Physician Fee Schedule. 

Advanced diagnostic imaging procedures include diagnostic magnetic resonance imaging (MRI), computed tomography (CT), and nuclear medicine imaging such as positron emission tomography (PET).

CMS has named the American College of Radiology (ACR), the Intersocietal Accreditation Commission (IAC), and The Joint Commission (TJC) as the accrediting organizations.

 

As was predicted by many, the Deficit Reduction Act is continuing to cause a major shake-out in the imaging center industry.  According to the Florida Business Journal, a major Florida-based imaging center company has filed for Chapter 11 reorganization and will close 5 of its 17 centers.  As this trend continues, many physicians who invested in centers in hopes that returns would help bolster practice revenues are now scrambling to figure out what their personal exposure might be if their investments go under – and rightly so.  Many such investments required investors to sign on to personal guarantees with lenders and landlords which could put investors’ personal assets at risk in the event of a default.  For more information on options for ailing imaging center investments, see the following article in Physicians News Digest at: http://physiciansnews.com/law/108rodriguez.html.  

Much has been in the news lately about the Children’s Health and Medicare Protection (CHAMP) Act of 2007 recently introduced by the House democrats.   The Bill’s proponents claim that if enacted it will provide insurance coverage for millions of children and improve and strengthen Medicare for America’s seniors and people with disabilities.  What Physicians — particularly surgeons who may be thinking of developing a specialty hospital — may not know is that  the Bill also contains language that would essentially eliminate the ability of physicians to invest in hospitals (specialty or otherwise) and would impose new requirements on existing physician-owned hospitals.  This language, found at Section 651 of the Bill, eliminates the whole hospital exception to the Stark law so that physicians could not refer to hospitals in which they have an ownership interest.  Although existing arrangements would be grandfathered, the grandfathered hospitals will have only 18 months to meet a number of new requirements related to growth, disclosure of ownership, limiting physician ownership to an aggregate of no more than 40% of the facility and no more than 2% individually, and other patient disclosure requirements.