December 8, 2009

"UNDER ARRANGEMENTS":  CMS NOW SEEKING COMMENTS ON DEFINITION OF "ENTITY"

Background

The Centers for Medicare and Medicaid Services ("CMS") recently amended the Stark Law regulatory definition of "entity."  This change, which took effect on October 1, 2009, broadened the meaning of "entity" to include not only the person or entity that has presented a claim to Medicare for designated health services ("DHS"), but also "the person or entity that has performed services that are billed as DHS" (emphasis added) (even if such person or entity is not the billing party).  This change affected many "under arrangements" deals between hospitals and physician-owned service providers, and caused much confusion among the industry, primarily because the term "performed" was not clearly defined.  Despite informal requests for clarification, CMS declined to provide further guidance prior to the implementation of the regulatory change.  Consequently, many parties restructured or unwound existing "under arrangements" deals prior to the October 1, 2009 deadline.  CMS has now seemingly acknowledged this confusion and is soliciting comments to assess whether further guidance would be beneficial to the industry. 

Comments

CMS has not proposed any new regulatory changes, but is seeking comments on the following issues:

•  Whether CMS should define or clarify "performed services that are billed as DHS" and, if so, how;
• Whether "performed services that are billed as DHS" should be analyzed in the same manner for inpatient and outpatient services provided under arrangements;
• Whether performance of a service billed as DHS should be determined based on how many of the following elements are provided: (1) lease of space used for performance of the service; (2) lease of equipment used for performance of the service; (3) supplies that are not separately billable but used in the performance of the service; (4) management services; (5) billing services; and (6) non-physician services that are not separately billable.  If so, whether certain of these elements should be weighed more heavily than others in determining whether DHS are performed;
• Whether an interpretation of "medical work" (a term used by CMS in prior commentary on this topic) was relied upon in restructuring arrangements and, if so, how;
• The degree to which the amount and nature of services provided by physician and non-physician personnel (for example, technicians) should influence the determination of whether a person or organization has performed services billed as DHS;
• The degree to which the ability to bill separately for the service should influence the determination regarding whether a person or organization has "performed services that are billed as DHS";
• Other comments or alternative approaches or criteria that would address CMS' policy concerns about overutilization and other abuse while minimizing the impact on legitimate non-abusive arrangements; and
• How the industry interpreted and applied the definition of "entity" and how "under arrangements" agreements may have been restructured in order to comply with the new definition of "entity."

Follow-up

Parties wishing to provide input to CMS on these points should contact your regular Hall Render attorney, or
Gregg Wallander at (317) 977-1431 or gwally@hallrender.com;
Erin Drummy at (317) 977-1470 or edrummy@hallrender.com; or
John Beyer at (317) 977-1480 or jbeyer@hallrender.com. 
Comments must be received by CMS no later than 5 p.m. on December 29, 2009.