Publications

Recent Stark II Changes Apply to Home Care Physicians

By: Andrew B. Wachler and Tracy Silverman Weissman, Wachler & Associates, P.C. Royal Oak, Michigan

Home care physicians are reminded that any home health services or other ancillary services ordered by them for which payment may be made by the Medicare or Medicaid programs are subject to the Stark II ban on physician self-referral. The Stark II ban generally prohibits a physician from making a referral for the furnishing of designated health services ("DHS"), for which payment may be made under the Medicare or Medicaid programs, to an entity with which the physician or an immediate family member has a financial relationship. Among the DHS covered by Stark II are home health services as well as physical and occupational therapy, durable medical equipment and supplies, and outpatient prescription drugs, all of which may be furnished by home care physicians to their patients. If a financial relationship exists, the physician is precluded from referring patients to the entity for DHS, and the entity is precluded from making a claim for payment under the Medicare or Medicaid programs for any such referred DHS unless the arrangement falls within a statutory exception.

Penalties for violating Stark II can be severe. They include denial of payment, refund of payment, imposition of a $15,000 per service civil monetary penalty and imposition of a $100,000 civil monetary penalty for each arrangement considered to be a circumvention scheme.

The first part of final regulations implementing the Stark II ban ("Phase I final regulations") took effect on January 4, 2002. Among the many changes to the Stark II ban contained in the Phase I final regulations are changes directly affecting home care physicians. These changes are briefly described below.

The Phase I final regulations clarify what services provided by physicians making home visits constitute DHS that are subject to Stark II. The preamble to the final regulations states that when a physician furnishes a physician service, including a visit to a home health patient, the physician service is billed as a physician service and is not considered to fall within the Stark II category of home health services constituting DHS. If, however, the physician orders a service such as physical therapy, durable medical equipment and supplies, or outpatient prescription drugs, that would otherwise constitute a DHS under Stark II, then the Stark II ban will be implicated and, accordingly, any financial relationship that the home care physician has with the entity billing Medicare or Medicaid for the service must fall within an exception to the ban.

Home care physicians often have financial relationships with home health agencies which bill for DHS. For example, a home health agency may hire a home care physician either as an independent contractor or as an employee to provide home care services on behalf of the agency. Similarly, a home health agency may employ or contract with a home care physician to serve as the medical director of the agency. Additionally, home care physicians may hold ownership or investment interests in home health agencies to which they refer patients.

The particular Stark law exception available to a home care physician depends on the type of financial relationship he or she has with the home health agency. In situations where a home care physician is an employee or independent contractor of a home health agency, for example, a compensation arrangement exists between the parties. The arrangement would need to be reviewed for compliance with an exception available for compensation arrangements, such as the exception for bona fide employment relationships or the exception for personal services arrangements, as applicable. In situations where a home care physician has an ownership or investment interest in a home health agency, the home care physician traditionally has had very limited options available in terms of qualifying for a Stark exception. The Phase I final regulations, however, have revised the requirements of the in-office ancillary services exception commonly relied upon by physicians in private practice to enable home care physicians in certain circumstances also to qualify for this exception.

Among the requirements for qualifying under the in-office ancillary services exception is that the DHS be furnished either in a centralized building or in a building in which the referring physician furnishes substantial physician services unrelated to the furnishing of DHS. Home care physicians whose principal medical practice consists of treating patients in their homes traditionally have not been able to meet either the centralized building requirement or the same building requirement since home health services are furnished in a different building for each patient (i.e., the patient's home). The Phase I final regulations revise the requirement to expressly provide that home care physicians can meet the same building requirement if the physician (or accompanying staff member) provides a DHS contemporaneously with a physician service that is not a DHS. The regulations note that a patient's home does not include a nursing, long-term care, or other facility or institution. Home care physicians who previously have had difficulty qualifying for an exception to the Stark II ban should have their arrangements reviewed in light of this change.

Also of note to home care physicians is the decision in the Phase I final regulations to revise the Medicare certification requirements for home health services to be consistent with Stark II. Prior to the issuance of the Phase I final regulations, the Medicare home health agency regulations prohibited a physician who had a significant ownership interest in a home health agency (defined as more than a five percent interest), or a significant contractual or financial relationship with a home health agency (defined as greater than $25,000), from certifying the need for home health services or establishing and reviewing a home health plan of care for the agency. The Phase I final regulations replace the concept of significant ownership interest or financial/contractual relationship in the home health agency regulations with the Stark II definition of financial relationship, which does not establish any minimum ownership interest or compensation amount for triggering the ban. As a result, the home health regulations have been amended to reflect that a physician cannot certify or recertify a patient's need to receive home health services from the agency if the physician has a financial relationship with the agency unless the financial relationship meets one of the Stark exceptions.

In light of the many changes in the Phase I final regulations specifically applicable to home care physicians, physicians who provide home health services are advised to review all of their arrangements with home health agencies and other entities that bill Medicare or Medicaid for the physicians' services to ensure that the arrangements comply with the Stark II ban. Further information on the Stark II ban can be found on our website at www.wachler.com or www.starkattorneys.com.