Stark II Analysis and
Summary
Bona Fide Group Practices for Purposes of
Stark
Whether a particular combination of physicians is
considered a bona fide group practice is critical for most practices to comply
with the in-office ancillary service exception. This is one of the most
confusing aspects of the statute, and was one of the most controversial issues
in the January 1998 Proposal. The final rule provides both more certainty and
more flexibility, and will minimize the overall impact of Stark on many
practices. Once again, however, the requirements are very detailed and
represent a degree of regulation of the structure and internal workings of
group practices that is unprecedented in Medicare.
Section 411.352 of the Phase I rule finalizes the
following requirements:
The group must be a single legal entity:
-
formed primarily to be a physician group medical
practice;
-
taking any organizational form recognized by state
law;
-
organized and owned by any individual or other legal
entity, except another operating physician practice. Its owners may
include individual PCs, or even PCs with multiple ownership, as long as
they do not operate as medical practices. Its owners do not have to be
physicians, or entities owned by physicians, but indirect physician owners
of a group are counted as "members" of the group.
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The group must have at least two physicians as owners or
employees. Indirect physician owners count for this purpose, but independent
contractors do not.
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Each physician "member" of the group must
furnish substantially the full range of patient care services that the
physician routinely furnishes through the joint use of shared office space,
facilities, equipment and personnel. As noted above, the rule excludes
independent contractor physicians from the definition of "member,"
facilitating compliance with this test by groups that use independent
contractors to perform specialized services.
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At least 75 percent of the total patient care services
of the group's members must be furnished through the group, billed under a
billing number assigned to the group, with amounts received treated as
receipts of the group. "Patient care services" is very broadly
defined to include administrative and management services that benefit
patients in general or the practice. This 75 percent test can be measured:
-
by time and documented by any reasonable means, or
-
by any other reasonable measure if fixed in advance,
uniformly applied, verifiable and documented.
This test is waived for groups located in Health
Professional Shortage Areas ("HPSAs") and applied differently if
part of a physician's time is spent practicing in a HPSA.
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The statute requires that the overhead and income of the
group be distributed in accordance with methods "previously
determined." The proposed rule requires these methods to be determined
prior to the time period during which the group earned the income or incurred
the expenses. The final rule relaxes this slightly by requiring that the
method be in place prior to payment for the service that generated the
income or accompanied the expense. This permits frequent adjustments to
allocation methods, as long they are effective prospectively, and as long as
the compensation to physicians meets the compensation test discussed below.
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The distribution test was complicated by the proposed
rule's unified business test, which appeared to preclude separate cost and
profit centers for different sites or specialties within a large group. The
Phase I rule keeps this additional test, but relaxes it to require only:
-
centralized decision-making by some governance group
with control over assets, liabilities, budgets and compensation;
-
consolidated billing, accounting and financial
reporting; and
-
centralized utilization review.
The final rule expressly permits decentralized
compensation practices for non-DHS revenues, and even for DHS revenues if the
compensation test below is met.
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The statute and the final rule start with a prohibition
on compensation that is directly or indirectly related to the volume of value
of a group physician's referrals, but then permit certain bonus and profit
sharing practices that result in compensation being only indirectly related to
referrals. The final rule is more favorable than either a strict reading of
the statute or the January 1998 Proposal.
First, the compensation test only applies to Medicare
DHS revenues.
Second, it does not apply to DHS services, even through
Medicare, personally performed by the ordering physician since these are no
longer referrals under the Phase I rule. It also appears, although there is
some remaining ambiguity on this point, that a physician may get direct
productivity credit for services performed "incident to," even
though they are DHS services, but only if the services are billed and paid for
under the "incident to" provision and not some other coverage
category, and the physician meets all the "incident to" criteria --
originates the care to which the service is incident, is present in the suite
and is immediately available.
Third, for profit sharing purposes, the "overall
profits of the group" means only the profits derived from all Medicare
and Medicaid DHS services of the group, or of any component of the group
consisting of at least five physicians. This permits the distribution of
Medicare ancillary profits by site, by specialty, or by any other grouping of
at least five doctors within the practice.
Fourth, the rule sets out three "safe
harbor" profit sharing methods as follows:
-
per capita distribution of the overall DHS profits;
-
distribution of DHS revenues on the same basis as
revenues derived from sources other than Federal and private payor DHS
services; or
-
any method if less than 5% of the group's revenues
comes from Medicare DHS services and no physician's allocation of Medicare
DHS revenues exceeds 5% of his or her compensation.
This list is not exclusive. The rule permits any
other "reasonable and verifiable" manner of distributing overall
profits that is not directly related to the physician's volume or value of
Medicare DHS services.
Fifth, the rule sets out three similar productivity
bonus "safe harbors" and permits any other "reasonable and
verifiable" bonus methodology that is not directly related to the
physician's referrals.
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Finally, the group practice definition includes, without
addition or subtraction, the statutory provision requiring that members of the
group personally conduct at least 75 percent of the physician-patient
encounters of the group.
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