[Federal Register: November 15, 2007 (Volume 72, Number 220)]
[Rules and Regulations]
[Page 64161-64162]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr15no07-20]
[[Page 64161]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Part 411
[CMS-1810-F2]
RIN 0938-AK67
Medicare Program; Delay of the Date of Applicability for Certain
Provisions of Physicians' Referrals to Health Care Entities With Which
They Have Financial Relationships (Phase III)
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Final rule.
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SUMMARY: This final rule delays the date of applicability of certain
specified compensation arrangements only, until December 4, 2008.
DATES: Effective Date: The provisions of this final rule are effective
December 4, 2007 as specified in the September 5, 2007 final rule (72
FR 51012). However, the date of applicability of the provisions of
Sec. 411.354(c)(1)(ii), Sec. 411.354(c)(2)(iv), and Sec.
411.354(c)(3) with respect to certain compensation arrangements
involving physician organizations and academic medical centers or
integrated section 501(c)(3) health care systems, as described herein,
are delayed until December 4, 2008.
FOR FURTHER INFORMATION CONTACT: Lisa Ohrin, (410) 786-4565.
SUPPLEMENTARY INFORMATION:
I. Background
The final rule, entitled ``Medicare Programs; Physicians' Referrals
to Health Care Entities With Which They Have Financial Relationships
(Phase III),'' published in the Federal Register on September 5, 2007
(72 FR 51012), interpreted and implemented certain provisions of
section 1877 of the Social Security Act (the Act). Under section 1877
of the 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) payable under the Medicare program,
and the entity may not bill for the services, unless an exception
applies.
II. Provisions of the Final Regulations
The Phase III final rule includes provisions under which referring
physicians will be treated as ``standing in the shoes'' of their
physician organizations for purposes of applying the rules that
describe direct and indirect compensation arrangements in Sec. 411.354
(72 FR 51026 through 51030). A ``physician organization'' is defined at
Sec. 411.351 as ``a physician (including a professional corporation of
which the physician is the sole owner), a physician practice, or a
group practice that complies with the requirements of Sec. 411.352.''
Therefore, for purposes of determining whether a direct or indirect
compensation arrangement exists between a physician and an entity to
which the physician refers Medicare patients for DHS, the referring
physician stands in the shoes of: (1) Another physician who employs the
referring physician; (2) his or her wholly-owned professional
corporation; (3) a physician practice (that is, a medical practice)
that employs or contracts with the referring physician; or (4) a group
practice of which the referring physician is a member or independent
contractor. The referring physician is considered to have the same
compensation arrangements (with the same parties and on the same terms)
as the physician organization in whose shoes the referring physician
stands.
Subsequent to the publication of Phase III, we received informal
comments on the Phase III ``stand in the shoes'' provisions from
affected industry stakeholders. These comments addressed the
application of the Phase III ``stand in the shoes'' provisions in the
academic medical center (AMC) setting or similar settings (such as a
nonprofit integrated health care system in which each affiliated
organization qualifies for exemption from federal income taxation under
section 501(c)(3) of the Internal Revenue Code (for purposes of this
final rule, referred to as an ``integrated section 501(c)(3) health
care system'')) where ``support payments'' or other similar monetary
transfers are common. The commenters asserted that, under Phase III,
support payments that previously did not trigger application of the
physician self-referral law will need to satisfy the requirements of an
exception if, for example, a DHS entity component (for example, a
hospital) of an AMC transfers funds to the faculty practice plan
component of the AMC. Specifically, in the situation where a physician
stands in the shoes of his or her faculty practice plan, the
compensation arrangement between the AMC component providing the
support payment and the faculty practice plan will be considered to be
a direct compensation arrangement between the component and the
physician. If the component making the support payment is a DHS entity
to which the physician refers Medicare patients, the arrangement
between the component and the faculty practice plan would need to
satisfy the requirements of a direct compensation arrangement exception
if the physician were to continue referring Medicare patients to the
component for DHS. A similar analysis applies in the case of an
integrated section 501(c)(3) health care system that includes both a
hospital affiliate and a nonprofit physician practice affiliate.
According to the commenters, it is unlikely that the requirements of
any available exception could be satisfied given the nature of support
payments (that is, support payments usually are not tied to specific
items or services provided by the faculty practice plan (or nonprofit
group practice within the health system), but rather are intended to
support the overall mission of the AMC or nonprofit integrated health
system).
We understand the commenters' concerns and intend to review the
application of the Phase III ``stand in the shoes'' provisions in the
situations described above. In addition, we are cognizant of the
special nature of AMCs and nonprofit integrated health care systems,
specifically with respect to their community service and teaching
missions. In order to evaluate fully the impact of the Phase III
``stand in the shoes'' provisions on remunerative relationships within
AMCs and nonprofit integrated health care systems that, prior to Phase
III, did not trigger application of the physician self-referral laws,
we are delaying the date of applicability of the provisions in Sec.
411.354(c)(1)(ii), Sec. 411.354(c)(2)(iv), and Sec. 411.354(c)(3) for
12 months after the effective date of Phase III (that is, until
December 4, 2008) as to the following compensation arrangements between
the following physician organizations and entities ONLY:
With respect to an AMC as described in Sec.
411.355(e)(2), compensation arrangements between a faculty practice
plan and another component of the same AMC; and
With respect to an integrated section 501(c)(3) health
care system, compensation arrangements between an affiliated DHS entity
and an affiliated physician practice in the same integrated section
501(c)(3) health care system.
We note that, in a prior rulemaking (Phase I), in response to a
comment that compensation arrangements between organizations regulated
under the IRS rules pose minimal risk of program or patient abuse, we
indicated that regulation under IRS rules, though
[[Page 64162]]
beneficial, is not necessarily sufficient to prevent fraud or abuse (66
FR 917). Our action delaying the date of applicability of the Phase III
provisions in Sec. 411.354(c)(1)(ii), Sec. 411.354(c)(2)(iv), and
Sec. 411.354(c)(3) with respect to integrated section 501(c)(3) health
care systems should not be read as a reversal of our previous position.
As stated above, we are delaying the date of applicability of these
provisions in a targeted manner in order to evaluate any unintended
impact of the Phase III ``stand in the shoes'' provisions.
III. Waiver of Proposed Rulemaking
We ordinarily publish a notice of proposed rulemaking and invite
public comment on the proposed rule. The notice and comment rulemaking
procedure is not required, however, if the rule is interpretive or
procedural in nature, and it may be waived if there is good cause that
it is impracticable, unnecessary, or contrary to the public interest
and we incorporate in the rule a statement of such a finding and the
reasons supporting that finding. Likewise, we ordinarily provide for a
delayed date of applicability of a final rule, but we are not required
to do so if the rule is procedural or interpretive. Where a delayed
date of applicability is required, this requirement may be waived for
good cause. Although we believe that this rule is procedural in nature
and, therefore, prior notice and comment and a delayed date of
applicability are not necessary, to the extent that it could be
considered to be a substantive rule, we set forth below our finding of
good cause for the waiver of notice and comment rulemaking and the
waiver of a delayed date of applicability.
Our implementation of this action without opportunity for public
comment and without a delayed date of applicability is based on the
good cause exceptions in 5 U.S.C. 553(b)(3)(B) and (d), respectively.
We find that seeking public comment on this action is impracticable,
unnecessary, and contrary to the public interest. We are implementing
this delayed date of applicability as a result of our review of the
informal comments on the Phase III ``stand in the shoes'' provisions
from various stakeholders. As discussed above, we understand from those
comments that, unless we delay the date of applicability of Sec.
411.354(c)(1)(ii), Sec. 411.354(c)(2)(iv), and Sec. 411.354(c)(3)
with respect to the compensation arrangements described herein only,
compensation arrangements that previously did not trigger application
of the physician self-referral law may need to satisfy the requirements
of an exception, requiring renegotiation of a large number of
contracts, or the restructuring of many common arrangements involving
AMCs and integrated 501(c)(3) health care systems, 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. Likewise, if we do not make this final rule effective upon
publication, arrangements described herein that have been in compliance
may fall temporarily out of compliance.
IV. Collection of Information Requirements
This document does not impose information collection and
recordkeeping requirements. Consequently, it need not be reviewed by
the Office of Management and Budget under the authority of the
Paperwork Reduction Act of 1995 (44 U.S.C. 35).
V. Regulatory Impact Statement
We do not believe that this delay in the date of applicability will
result in any significant economic impact on any small entity. Until
the effective date of the provisions of Sec. 411.354(c)(1)(ii), Sec.
411.354(c)(2)(iv), and Sec. 411.354(c)(3) with respect to the types of
compensation arrangements described herein as subject to the delayed
date of applicability, physicians, AMCs, and certain nonprofit
integrated health care systems do not have to comply with the
requirements of the ``stand in the shoes'' provisions of the Phase III
final rulemaking and may continue to rely on whichever appropriate
exceptions they used before the creation of the new provisions.
In accordance with the provisions of Executive Order 12866, this
regulation was reviewed by the Office of Management and Budget.
(Catalog of Federal Domestic Assistance Program No. 93.773,
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)
Dated: November 2, 2007.
Kerry Weems,
Acting Administrator, Centers for Medicare & Medicaid Services.
Approved: November 6, 2007.
Michael O. Leavitt,
Secretary.
[FR Doc. 07-5655 Filed 11-9-07; 2:46 pm]
BILLING CODE 4120-01-P