[Federal Register: June 25, 2004 (Volume 69, Number 122)]
[Rules and Regulations]
[Page 35529-35530]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25jn04-13]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Part 411
[CMS-1809-F5]
RIN 0938-AM99
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 19 days, until July 26,
2004, the effective date of the last sentence of 42 CFR Sec.
411.354(d)(1), as published in the January 4, 2001 final rule (66 FR
856). The new effective date coincides with the effective date of a
March 26, 2004 interim final rule that removed this sentence from the
regulation. Consequently, the last sentence of Sec. 411.354(d)(1), as
originally published in January 2001, will be automatically superseded
by the March 2004 interim final rule.
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 further delayed until July 26, 2004 at
which time it will be superseded by a new Sec. 411.354(d)(1),
published in the Federal Register on March 26, 2004 (69 FR 16054),
effective on July 26, 2004.
FOR FURTHER INFORMATION CONTACT: Karen Raschke, (410) 786-0016.
SUPPLEMENTARY INFORMATION: 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
at http://cms.hhs.gov/medlearn/refphys.asp.
I. Background
Under section 1877 of the Social Security Act (Act), 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
[[Page 35530]]
the entity may not bill for the services, unless an exception applies.
Many of the exceptions that apply to compensation relationships require
that the amount of compensation be ``set in advance.'' Section
411.354(d)(1) defines the term ``set in advance.''
Section 411.354(d)(1) was first published in the Federal Register
on January 4, 2001 (66 FR 856) in a final rule with comment period that
is commonly referred to as the ``Phase I'' physician self-referral
final rule. The last sentence of Sec. 411.354(d)(1), as originally
published in Phase I stated that--``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 Phase
I final rule opposed this language. The comments indicated that
physicians are commonly paid for their professional services on a
percentage compensation basis and that hospitals, academic medical
centers (AMCs), 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. To give the agency additional
time to reconsider the matter, 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). Through a series of
subsequent rules, we further delayed the effective date of this
provision until July 7, 2004 (see 67 FR 70322, 68 FR 20347, and 68 FR
74491). We indicated in those rules that we intended to definitively
address the percentage compensation issue in the ``Phase II'' physician
self-referral final rule.
We published the Phase II interim final rule with comment period on
March 26, 2004. In Phase II, we modified our interpretation of ``set in
advance'' to permit some percentage compensation if the methodology for
calculating the compensation is set in advance and does not change over
the course of the arrangement in any manner that reflects the volume or
value of referrals or other business generated by the referring
physician. Accordingly, we removed the last sentence of Sec.
411.354(d)(1) and otherwise modified the provision to reflect this
interpretation. Phase II becomes effective on July 26, 2004, 19 days
after the expiration of the most recent delay in effective date for the
last sentence of the Phase I ``set in advance'' definition.
II. Provisions of This Final Rule
To avoid regulatory conflict and unnecessary disruption to existing
contractual arrangements in the health care industry, we are further
postponing for an additional 19 days, until July 26, 2004, the
effective date of the last sentence of Sec. 411.354(d)(1) as published
in Phase I. This delay is intended to coincide with the effective date
of the Phase II physician self-referral interim final rule.
Accordingly, on July 26, 2004, Sec. 411.354(d)(1) of Phase I will
automatically be superseded by the revised Sec. 411.354(d)(1), as
published in Phase II. 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 the Phase I 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.)
III. 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.
We do not believe that a delay in effective date is subject to
notice and comment procedures when the regulatory provision at issue
has never become effective. Nevertheless, for the benefit of the
public, we set forth below the reasons why our implementation of this
action without opportunity for public comment satisfies the good cause
exception in 5 U.S.C. 553(b). We find that seeking public comment on
this action would be impracticable and unnecessary.
We believe public comment is unnecessary because 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. 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, we find that seeking public comment on this delay in
effective date will be impracticable and contrary to the public
interest because it would implement, for 19 days, a statutory
interpretation that we have rejected in a recent interim final rule.
Even a brief implementation of the rejected statutory interpretation
carries the potential for significant disruption in the health care
industry. As discussed above, we understand from public 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), many physician contracts with hospitals, AMCs,
and other entities furnishing DHS will not be in compliance with the
physician self-referral prohibition. Consequently, these physicians
will be unable to refer to the hospitals, AMCs, and other DHS entities
to whom they are contractually obligated to provide professional or
other services, and these DHS entities will be prohibited from billing
Medicare for any services furnished as a result of a prohibited
referral. We are concerned that this would unnecessarily disrupt the
practice of medicine, inconvenience Medicare beneficiaries, or
interfere with beneficiary medical care and treatment.
(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: May 13, 2004.
Mark B. McClellan,
Administrator, Centers for Medicare & Medicaid Services.
Approved: June 17, 2004.
Tommy G. Thompson,
Secretary.
[FR Doc. 04-14272 Filed 6-24-04; 8:45 am]
BILLING CODE 4120-01-P