New physician self-referral rules could change hospital deals

About a year ago, CMS approved major changes to existing anti-self referral arrangements by changing the rules for the Medicare hospital inpatient PPS system. Now, as of October 1, the rules will take effect, which could force hospitals and physicians to restructure many deals.

The changes prevent hospitals from contracting with physician-owned entities to provide many ancillary services; per use or "per-click" deals on equipment and space leases; and compensation based on a cut of revenue produced by space or equipment. Among the biggest changes is the ancillary services restriction, which once qualified for several safe harbors under Stark.

Taken together, these rules give hospitals no choice but to significantly change, or even unwind, some deals with physicians, observers say. Doctors may be able to keep conducting billing and management activities, but will have to limit or end clinical services, for example.

These changes make it especially difficult for doctors and hospitals to build up joint ideas around hospital ventures, according to Boston-based attorney Lawrence Vernaglia of Foley & Lardner LLP. Since Stark is a strict-liability statute, hospitals or doctors that violate the law are on the hook for penalties, whether or not they intended to do so, Vernaglia told American Medical News.

To learn more about these restrictions:
- read the CMS rules [1] for FY 2009 IPPS
- read this American Medical News piece [2]

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