[Federal Register: November 22, 2002 (Volume 67, Number 226)]
[Rules and Regulations]
[Page 70322-70323]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22no02-8]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Part 411
[CMS-1809-F2]
RIN 0938-AM21
Medicare and Medicaid Programs; Physicians' Referrals to Health
Care Entities With Which They Have Financial Relationships: Extension
of Partial Delay of Effective Date
AGENCY: Centers for Medicare & Medicaid Services (CMS), DHHS.
ACTION: Final rule; extension of partial delay in effective date.
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SUMMARY: This final rule further delays for 6 months, until July 7,
2003, the effective date of the last sentence of 42 CFR 411.354(d)(1).
Section 411.354(d)(1) was promulgated in the final rule entitled
``Medicare and Medicaid Programs; Physicians' Referrals to Health Care
Entities With Which They Have Financial Relationships,'' published in
the Federal Register on January 4, 2001 (66 FR 856). A 1-year delay of
the effective date of the last sentence in Sec. 411.354(d)(1) was
published in the Federal Register on December 3, 2001 (66 FR 60154).
This extension of the 1-year delay in the effective date of that
sentence will give us additional time to reconsider the definition of
compensation that is ``set in advance'' as it relates to percentage
compensation methodologies in order to avoid unnecessarily disrupting
existing contractual arrangements for physician services. Accordingly,
the last sentence of Sec. 411.354(d)(1), which would have become
effective January 6, 2003, will not become effective until July 7,
2003. We expect a future final rule with comment period, entitled
``Medicare Program; Physicians' Referrals to Health Care Entities With
Which They Have Financial Relationships'' (Phase II), to further
address this issue prior to this effective date.
DATES: Effective date: The effective date of the last sentence in Sec.
411.354(d)(1) of the final rule published in the Federal Register on
January 4, 2001 (66 FR 856), is delayed for an additional 6 month
period to July 7, 2003.
FOR FURTHER INFORMATION CONTACT: Karen Raschke, (410) 786-0016.
SUPPLEMENTARY INFORMATION:
Copies: This Federal Register document is available from the
Federal Register online database through GPO Access, a service of the
U.S. Government Printing Office. The Web site address is: http://
www.access.gpo.gov/nara/index.html.
In addition, the information in this final rule will be available
soon after publication in the Federal Register on our MEDLEARN Web
site: http://cms.hhs.gov/medlearn/refphys.asp.
I. Background
The final rule, entitled ``Medicare and Medicaid Programs;
Physicians' Referrals to Health Care Entities With Which They Have
Financial Relationships,'' published in the Federal Register on January
4, 2001 (66 FR 856), interpreted certain provisions of section 1877 of
the Social Security Act (the Act). Under section 1877, if a physician
or a member of a physician's immediate family has a financial
relationship with a health care entity, the physician may not make
referrals to that entity for the furnishing of designated health
services (DHS) under the Medicare program, and the entity may not bill
for the services, unless an exception applies. Many of the statutory
and new regulatory exceptions that apply to compensation relationships
require that the amount of compensation be ``set in advance.'' Section
411.354(d)(1) of the final rule defines the term ``set in advance.''
The last sentence of Sec. 411.354(d)(1) reads: ``Percentage
compensation arrangements do not constitute compensation that is `set
in advance' in which the percentage compensation is based on
fluctuating or indeterminate measures or in which the arrangement
results in the seller receiving different payment amounts for the same
service from the same purchaser.'' Many of the comments we received
regarding the January 4, 2001 physician self-referral final rule
indicated that physicians are commonly paid for their professional
services using a formula that takes into account a percentage of a
fluctuating or indeterminate measure (for example, revenues billed or
collected for physician services). According to the commenters, this
compensation methodology is frequently used by hospitals, physician
group practices, academic medical centers, and medical foundations.
Several commenters pointed out that this aspect of the final rule,
which is applicable to academic medical centers and medical foundations
(among others), is inconsistent with the compensation methods permitted
under the statute for many physician group practices and employed
physicians (that is, neither section 1877(h)(4)(B)(i) of the Act nor
section 1877(e)(2) of the Act contains the ``set in advance''
requirement). We
[[Page 70323]]
understand that hospitals, academic medical centers, medical
foundations and other health care entities would have to restructure or
renegotiate thousands of physician contracts to comply with the
language in Sec. 411.354(d)(1) regarding percentage compensation
arrangements.
Accordingly, we published a 1-year delay of the effective date of
the last sentence in Sec. 411.354(d)(1) in the Federal Register on
December 3, 2001 (66 FR 60154) in order to reconsider the definition of
compensation that is ``set in advance'' as it relates to percentage
compensation methodologies.
II. Response to Public Comments
In response to the publication of the interim final rule with
comment period on December 3, 2001 (66 FR 60154), we received a total
of four comments. Because the sole purpose of that interim final rule
with comment period was to delay the effective date of the last
sentence in Sec. 411.354(d)(1), we only accepted comments addressing
the length of the delay of that sentence. The following discussion
includes a description of the two pertinent comments that we received,
along with our responses.
Comment: Two commenters requested that we further postpone the
effective date for an additional year in order to better effectuate our
stated goals of providing stability in the health care services
available to Medicare beneficiaries, and of avoiding unnecessary
disruption of existing contractual arrangements. They were of the
opinion that, although the current 1-year delay in effective date may
provide us with enough time to publish further guidance, physicians and
other health care entities will need additional time to renegotiate
reimbursement and compensation arrangements in order to avoid
disrupting existing contractual arrangements.
Response: We agree that additional time is necessary, both for us
to reconsider this issue, and for health care entities to bring their
arrangements into compliance. However, we believe that a further 6-
month delay in the effective date will suffice because we expect a
future final rule with comment period entitled ``Medicare Program;
Physicians' Referrals to Health Care Entities With Which They Have
Financial Relationships'' (Phase II) to further address this issue
prior to this effective date.
III. Provisions of This Final Rule
To avoid any unnecessary disruption to existing contractual
arrangements while we consider modifying this provision, we are further
postponing, for an additional 6 months, until July 7, 2003, the
effective date of the last sentence of Sec. 411.354(d)(1). This delay
is intended to avoid disruptions in the health care industry, and
potential attendant problems for Medicare beneficiaries, which could be
caused by allowing the last sentence of Sec. 411.354(d)(1) to become
effective on January 6, 2003. In the meantime, compensation that is
required to be ``set in advance'' for purposes of compliance with
section 1877 of the Act may continue to be based on percentage
compensation methodologies, including those in which the compensation
is based on a percentage of a fluctuating or indeterminate measure. We
note that the remaining provisions of Sec. 411.354(d)(1) will still
apply and that all other requirements for exceptions must be satisfied
(including, for example, the fair market value and ``volume and value''
requirements).
IV. Waiver of Proposed Rulemaking
We ordinarily publish a notice of proposed rulemaking and invite
public comment on the proposed rule. This procedure can be waived,
however, if an agency finds good cause that the notice and comment
rulemaking procedure is impracticable, unnecessary, or contrary to the
public interest and if the agency incorporates in the rule a statement
of such a finding and the reasons supporting that finding.
Our implementation of this action without opportunity for public
comment is based on the good cause exceptions in 5 U.S.C. 553(b)(B). We
find that seeking public comment on this action would be impracticable
and unnecessary. We are implementing this additional delay of effective
date as a result of our review of the public comments that we received
on the January 4, 2001 physician self-referral final rule. As discussed
above, we understand from those comments and the comments we received
on the December 3, 2001 interim final rule that, unless we further
delay the effective date of the last sentence of Sec. 411.354(d)(1),
hospitals, academic medical centers, and other entities will have to
renegotiate numerous contracts for physician services, potentially
causing significant disruption within the health care industry. We are
concerned that the disruption could unnecessarily inconvenience
Medicare beneficiaries or interfere with their medical care and
treatment. We do not believe that it is necessary to offer yet another
opportunity for public comment on the same issue in the limited context
of whether to delay this sentence of the regulation. In addition, given
the imminence of the January 6, 2003 effective date, we find that
seeking public comment on this delay in effective date would be
impracticable because it would generate uncertainty regarding an
imminent effective date. This uncertainty could cause health care
providers to renegotiate thousands of contracts with physicians in an
effort to comply with the regulation by January 6, 2003 if the proposed
delay is not finalized until after the opportunity for public comment.
Thus, providing the opportunity for public comment could result in the
very disruption that this delay of effective date is intended to avoid.
(Catalog of Federal Domestic Assistance Program No. 93.773
Medicare--Hospital Insurance Program; Program No. 93.774, Medicare--
Supplementary Medical Insurance Program; and Program No. 93.778,
Medical Assistance Program)
Dated: September 27, 2002.
Thomas A. Scully,
Administrator, Centers for Medicare & Medicaid Services.
Approved: November 19, 2002.
Tommy G. Thompson,
Secretary.
[FR Doc. 02-29797 Filed 11-21-02; 8:45 am]
BILLING CODE 4120-01-P