June 1998 Bulletin

Academy tells HCFA to drop rule on self-referral

The Academy is strongly urging the Health Care Financing Administration (HCFA) to withdraw its proposed rule on physician self-referral, saying that it has added even more confusion to what activities are permissible.

HCFA should make substantial changes in the proposed rule, or if the agency doesn't have the statutory authority to make the changes, the Academy is urging HCFA to work with Congress to make the needed legislative changes that will allow it to publish a more flexible regulatory proposal.

HCFA published the proposed rule, "Medicare and Medicaid Programs; Physicians' Referrals to Health Care Entities With Which They Have Financial Relationships," in the January 9, 1998 Federal Register. The rule defines terms of the "Stark provisions" in the Medicare reform sections of the 1989 and 1993 budget reconciliation acts.

HCFA's proposed rule does not provide clear, unambiguous guidance for compliance with the "Stark provisions," says James Heckman, MD, Academy president, in a comment letter to HCFA."The Academy is greatly concerned about the enormous complexity of the proposal. The over 70 pages of detailed regulation in the proposed rule point to the fact that even experienced health care attorneys and accountants will have difficulty advising their clients on how to safely adhere to the regulation."

While the Academy shares HCFA's concern regarding fraud and abuse in the Medicare program and supports the original intent of the ban on self-referral, Dr. Heckman says, "The apparent presumption by HCFA in its proposed rule that any ëreferral' for a ëdesignated health service' is illegal if it involves remuneration or other compensation is unacceptable and interferes with normal medical practice, including that of orthopaedics.

Rather than proposing a blanket prohibition on referrals, the Academy urges HCFA to approach the self-referral issue in a much more nuanced and sophisticated manner.

There has been a great deal of confusion about what constitutes a referral, especially referrals made among members of the same practice arrangement, says Dr. Heckman. The proposed rule confirms HCFA's contention that a "referral" subject to the "Stark provisions" takes place whenever a physician requests any "designated health service" covered by Medicare Part A or Part B even if the physician furnishes the services personally, unless a specific exemption is met.

The Academy believes strongly that HCFA's definition of what constitutes a "referral" is unnecessarily broad and essentially gives preferential treatment to certain practice settings at the expense of others. Instead, the Academy suggests that HCFA adopt a standard that those activities that a solo practitioner performs as a customary and integral part of patient treatment should not be considered a "referral." This definition should extend to physicians in practice arrangements as well.

The Academy strongly believes that most of the problems being experienced with the "Stark provisions" can be solved with a "common sense" approach to the question of what is a "referral."

The Academy's comment letter also addresses durable medical equipment, shared employees and other issues.

The "Stark statute" defines the term "referral" as:

"the request by a physician for an item or services for which payment may be made under Part B, including the request for a consultation with another physician [and any test or procedure ordered by, or to be performed by (or under the supervision of) that other physician]...including the request or establishment of a plan of care by a physician that includes the provision of a designated health service."

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