2005 FPMP Compliance Training: Physician/Hospital Financial Arrangements Presented by: Brigid M. Maloney, Esq. Brigid M. Maloney, Esq. U.B. Associates U.B. Associates

Financial Arrangements with Hospitals Important Considerations: Stark Law Stark Law Antikickback Statute Antikickback Statute Internal Revenue Code Internal Revenue Code

Stark Law If a physician (or immediate family member) has a financial relationship with an entity, then the physician may not make referrals to the entity for the furnishing of designated health services, and the entity may not submit a bill for the furnishing of any such services.

Designated Health Services Clinical lab services Clinical lab services Physical therapy, occupational therapy and speech-language pathology services Physical therapy, occupational therapy and speech-language pathology services Radiology and other imaging services not including nuclear medicine Radiology and other imaging services not including nuclear medicine Radiation therapy not including nuclear medicine Radiation therapy not including nuclear medicine Durable medical equipment and supplies Durable medical equipment and supplies Prosthetics, orthotics and prosthetic devices and supplies Prosthetics, orthotics and prosthetic devices and supplies Home health services Home health services Outpatient prescription drugs Outpatient prescription drugs Parental and enteral nutrients and PEN-associated equipment and supplies. Parental and enteral nutrients and PEN-associated equipment and supplies. Inpatient hospital services Inpatient hospital services Outpatient hospital services Outpatient hospital services If a physician (or immediate family member) has a “financial relationship” with an entity, then the physician may not make referrals to the entity for the furnishing of “designated health services”, and the entity may not submit a bill for the furnishing of any such services.

Referrals A “referral” is a request by a physician for an item or service for which Medicare Part B may pay, including a request for a consultation (including any tests ordered by the consultant), as well as a request or establishment of a plan of care, with certain exceptions. A referral does not include a request for a DHS item or service that is provided or performed by the referring physician. If a physician (or immediate family member) has a “financial relationship” with an entity, then the physician may not make referrals to the entity for the furnishing of “designated health services”, and the entity may not submit a bill for the furnishing of any such services.

Financial Relationship Compensation Arrangement --or-- Ownership or Investment Interest If a physician (or immediate family member) has a “financial relationship” with an entity, then the physician may not make referrals to the entity for the furnishing of “designated health services”, and the entity may not submit a bill for the furnishing of any such services.

Compensation Arrangement Direct or indirect remuneration between a physician and an entity, overtly or covertly, in cash or in kind. If a physician (or immediate family member) has a “financial relationship” with an entity, then the physician may not make referrals to the entity for the furnishing of “designated health services”, and the entity may not submit a bill for the furnishing of any such services.

Compensation Arrangements -- Examples Physician employment agreements Physician professional service agreements (e.g., independent contractor agreements) Medical director agreements Lease of office space or equipment Lease of time or a “per service” lease with an MRI imaging center.

Compensation Arrangements-- Exceptions Office space and equipment rentals Bona fide employment relationships Personal service arrangements

Office Space Rentals Written lease, signed by the parties, specifying the covered premises or equipment Written lease, signed by the parties, specifying the covered premises or equipment Leased space/equipment must not exceed that which is reasonable and necessary for legitimate business purposes Leased space/equipment must not exceed that which is reasonable and necessary for legitimate business purposes Space/equipment is used exclusively by lessee when being used by lessee Space/equipment is used exclusively by lessee when being used by lessee Lease term of at least one year Lease term of at least one year Rental amount is set in advance, FMV, not determined in a manner that takes into account value of referrals or other business generated between the parties Rental amount is set in advance, FMV, not determined in a manner that takes into account value of referrals or other business generated between the parties Commercially reasonable Commercially reasonable

Bona fide employment relationships Employment is for identifiable services Employment is for identifiable services Compensation is FMV Compensation is FMV Compensation not determined in a manner that takes into account the volume or value of referrals by the referring physician Compensation not determined in a manner that takes into account the volume or value of referrals by the referring physician Compensation is commercially reasonable Compensation is commercially reasonable

Personal Service Arrangements Arrangement is set out in writing, signed by the parties, and specifies the services covered by the arrangement Arrangement is set out in writing, signed by the parties, and specifies the services covered by the arrangement The aggregate services contracted for do not exceed those that are reasonable and necessary for the legitimate business purposes of the arrangement The aggregate services contracted for do not exceed those that are reasonable and necessary for the legitimate business purposes of the arrangement The term of the arrangement is at least one year The term of the arrangement is at least one year Compensation is set in advance, does not exceed FMV, does not take into account the volume or value of referrals or other business generated between the parties Compensation is set in advance, does not exceed FMV, does not take into account the volume or value of referrals or other business generated between the parties Services performed do not involve any illegal activities Services performed do not involve any illegal activities

Stark Reporting Requirements Required information The name and unique physician identification number (UPIN) of each physician who has a reportable financial relationship with the entity. The name and unique physician identification number (UPIN) of each physician who has a reportable financial relationship with the entity. The name and UPIN of each physician who has an immediate family member who has a reportable financial relationship with the entity. The name and UPIN of each physician who has an immediate family member who has a reportable financial relationship with the entity. The covered services furnished by the entity. The covered services furnished by the entity. The nature of the financial relationship as evidenced in records that the entity knows or should know about. The nature of the financial relationship as evidenced in records that the entity knows or should know about. Consequences of failure to report Up to $10,000 for each day following the deadline until the information is submitted. Up to $10,000 for each day following the deadline until the information is submitted.

Sanctions No payment may be made for a designated health service (DHS) that is provided in violation of Stark. No payment may be made for a designated health service (DHS) that is provided in violation of Stark. If an entity collects any amounts that were provided in violation of Stark, those amounts must be refunded on a timely basis. If an entity collects any amounts that were provided in violation of Stark, those amounts must be refunded on a timely basis. Unrefunded collections are subject to a $15,000 civil monetary penalty for each service rendered in violation of Stark. Unrefunded collections are subject to a $15,000 civil monetary penalty for each service rendered in violation of Stark. Fines for cross-referral arrangements or other unlawful referral schemes may be up to $100,000 per arrangement. Fines for cross-referral arrangements or other unlawful referral schemes may be up to $100,000 per arrangement. Physician exclusion from federal payor programs. Physician exclusion from federal payor programs.

Antikickback Statute Whoever knowingly and willfully solicits or receives any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind— in return for referring an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under a Federal health care program… shall be guilty of a felony and upon conviction thereof, shall be fined not more than $25,000 or imprisoned for not more than five years, or both.

Antikickback Statute Safe Harbors Space/Equipment Rentals Personal Services & Management Contracts Bona fide Employment Arrangements

Space/Equipment Rentals Written lease, signed by both parties. Written lease, signed by both parties. Lease specifies the premises/equipment covered by the lease. Lease specifies the premises/equipment covered by the lease. If part-time rental, lease specifies exactly the schedule of intervals, their precise length, and the exact rent for such intervals. If part-time rental, lease specifies exactly the schedule of intervals, their precise length, and the exact rent for such intervals. The term of the lease is for not less than one year. The term of the lease is for not less than one year. Rental amount is set in advance Rental amount is set in advance Rental amount is fair market value Rental amount is fair market value Rental amount is not determined in a manner that takes into account the volume or value of any referrals Rental amount is not determined in a manner that takes into account the volume or value of any referrals

Space/Equipment Rentals Fair market value = value of the rental property or equipment for general commercial purposes Caveat: FMV cannot be adjusted to reflect the additional value that one party would attribute to the property based on proximity to sources of referrals or business otherwise generated.

Personal Services & Management Contracts The agreement is set out in writing and signed by the parties. The agreement is set out in writing and signed by the parties. The agreement specifies the services to be provided by the agent. The agreement specifies the services to be provided by the agent. If the agreement is intended to provide for services on a periodic, sporadic or part-time basis, the agreement specifies exactly the schedule of such intervals, their precise length, and the exact charge for such intervals. If the agreement is intended to provide for services on a periodic, sporadic or part-time basis, the agreement specifies exactly the schedule of such intervals, their precise length, and the exact charge for such intervals. The term of the agreement is for not less than one year. The term of the agreement is for not less than one year. The aggregate compensation is set in advance, consistent with FMV and not determined in a manner that takes into account the volume or value of any referrals or business otherwise generated between the parties The aggregate compensation is set in advance, consistent with FMV and not determined in a manner that takes into account the volume or value of any referrals or business otherwise generated between the parties The services performed under the agreement are not illegal. The services performed under the agreement are not illegal.

Employment Arrangements A bona fide employment relationship with the employer, for employment in the furnishing of any item or service for which payment may be made in whole or in part under Medicare or a State health care program.

The big picture FMV – look at all remunerative sources: contract dollars + billing and collections +equipment/supplies/personnel+ other perks and freebies = Total compensation package

Internal Revenue Code IRC Sec. 501(c)(3): Corporations…organized and operated exclusively for religious, charitable…or educational purposes… no part of the net earnings of which inures to the benefit of any private shareholder or individual…

If you only remember one thing… Fair Market Value

And one more thing…. CONTRACT, CONTRACT, CONTRACT Provide no services without a contract… Accept no payment (cash or in kind) without a contract… Use no hospital resources without a contract…

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