Proposed government rules on physician self-referral released last month put referrals among members of a group practice under the microscope and may have a major impact on groups' compensation or productivity bonuses, analysts say.
But health law attorneys also say the long-awaited proposed regulations raise as many questions as they answer.
"One of the things we had hoped was the publication of the regulations would clear up some of the ambiguities in the statutes, but I don't believe that's occurred," says attorney Sandy Teplitzky, of Ober, Kaler, Grimes & Shriver in Baltimore.
Public comments can be made to HCFA until March 10, and final regulations are expected after a full review.
Impetus for the regulations was a trend in the 1980s that saw physician ownership and investment in freestanding health facilities grow to 8%, according to American Medical Association estimates. Two studies by federal agencies also found that physicians who owned or invested in laboratory and diagnostic facilities ordered more services than those without such holdings. Fueled by such studies, Congress boosted its regulation over those arrangements.
The 405-pages of new rules are aimed at clarifying the "Stark II" regulations, which banned self-referrals to a variety of ancillary health services, including services related to physical therapy and radiology. The bill was named for its chief sponsor, Rep. Pete Stark (D-Calif.).
Since it was passed in 1995, Stark II has been greeted with confusion and questions about how HCFA planned to enforce it. The recently proposed regulations attempt to clarify the definition of a group practice. The definition is significant because members of a group practice are allowed to make referrals to one another.
According to the new rules, only full- or part-time employees are considered members, eliminating referrals to or from independent contractors. Group practices also must meet stricter legal and financial requirements.
"It requires tremendous integration within the practice," Teplitzky says. "They have to share costs and overhead, they have to be a real group practice. (The rules) are trying to get away from the old group practice without walls."
Regarding compensation, the rules state that physicians cannot receive compensation or productivity bonuses based on the volume or value of referrals. Because many group practices base bonuses on productivity, they will be forced to restructure their pay scales.
In the past, group practices made up of many small offices often determined expenses and revenues on a clinic-by-clinic basis. But to qualify as a group practice in the future, all expenses and revenues must be pooled, the rules state.
"Physicians want to keep practicing with expenses and revenues based on their own practice, but at the same time consider themselves part of a group," says Elizabeth McLaughlin, an attorney with Jones, Day, Reavis & Pogue in Washington. "Groups will have to look fairly carefully at their methods for distributing costs and revenues because a distribution system that is based on satellite offices is no longer acceptable."
The new regulations do allow such group practices to use more than one billing number. And while the rules require groups to provide health services in a centralized location, they allow more than one centralized location. "HCFA's doing its best to recognize the realities of how the business is operating," McLaughlin says.
The exemption for in-office ancillary services remains, but the rules clarify that the services must be personally provided by the referring physician, another member of the group, or someone who is directly supervised by the referring physician, who must be physically present. The rules also state that in-office services must be provided in the same building in which the referring physician practices.
Physicians who are investors or partial owners of a hospital will be allowed to refer patients to the hospital but not for ancillary services at other hospital-owned sites.