Deadline For Publication Of Phase III Stark Rules Extended

The Centers for Medicare and Medicaid Services (“CMS”) recently announced that its deadline for publishing the Phase III Stark regulations has been extended from March 26, 2007 to March 26, 2008. CMS indicated that in the meantime, its Phase II interim final rules published on March 26, 2004 will remain in effect. CMS indicated in its notice that it was not able to meet the three-year deadline for publication of the Phase III rules, due to the extensive amount of public comments it received requesting clarifications and revisions to the Phase II interim final rules, and because of the need for substantial interagency coordination between CMS and other agencies, including the Office of Inspector General and the Department of Justice. Until the Phase III rules are issued, healthcare providers entering into financial arrangements with referring physicians should consider the potential Stark implications of such arrangements under the existing Phase II rules until the Phase III rules become final.

OIG Advises Hospital Not To Subsidize Ambulance Transportation For Patients Outside Hospital’s Service Area

In Advisory Opinion No. 07-02, the Office of Inspector General (the “OIG”) advised a non-profit hospital that its proposal to subsidize the ambulance transportation costs of patients from outside its local area would potentially violate the Anti-Kickback Statute.

The hospital in question treats patients transferred by ambulance to the hospital from outside the hospital’s local area. Historically, the Medicare carrier had reimbursed patients for that cost. However, the Medicare carrier began refusing to pay the full amount of these claims, citing the rule that Medicare will only pay for local ambulance transportation, except where non-local transportation is necessary to take the patient to the “nearest institution with appropriate facilities.” Patients complained to the hospital when they began receiving bills for the uncovered portion of non-local ambulance trips, and the hospital became concerned that physicians from outside the local area might be disinclined to refer patients to the hospital in light of the patient complaints.

In response, the hospital proposed to contract directly with various air and ground ambulance suppliers to transport patients to the hospital from outside its local area. The hospital would pay the ambulance suppliers a negotiated fee and submit claims for reimbursement directly to third-party payors, including Medicare and Medicaid. The hospital proposed to absorb any costs beyond those reimbursed by Medicare and other payors.

The OIG advised that it would likely take enforcement action against the proposed subsidy. The OIG stated that the payment for a subsidy of an expense normally borne by the patient constitutes a form of remuneration to the patient that would be likely to influence their choice of provider. The OIG concluded that the hospital’s promise not to advertise the subsidy was not a significant safeguard since the availability of the subsidized ambulance service would be known to referring physicians who would likely serve as an indirect source of such information to the patients. The OIG also noted that the hospital candidly acknowledged that the whole point of the proposed subsidy was to induce the patients to choose the hospital for the services even though the hospital was located out of the patients’ local area.

This opinion is the latest of several the OIG has issued in the last few years involving the provision of free or discounted items or services to patients. Significantly, unlike other proposed subsidy programs which the OIG had blessed in the past, this proposed subsidy was not limited to situations where a patient had a demonstrated financial need. This opinion points out the importance of providers carefully considering the fraud and abuse implications of any programs involving patient subsidies before implementing same. Any such arrangement should be carefully analyzed under the applicable fraud and abuse statutes, and the OIG Advisory Opinions dealing with same.

OIG Will Not Challenge Use of Credit Card Rewards by Nursing Home

In Advisory Opinion No. 07-03, the Office of Inspector General (the “OIG”) advised that it would not impose sanctions against a residential care facility that intended to use rewards from credit card issuers for its benefit and that of its employees. Even though the nursing home would seek reimbursement from Medicare and Medicaid for some or all of the costs associated with goods and services purchased with the credit cards, the OIG concluded there was no violation of the Anti- Kickback Statute since there would be no referrals between the credit card issuers and the nursing home.

With regard to the nursing home’s proposed use of some of the credit card rewards to compensate employees, the OIG concluded that any such rewards provided to employees would fall under the protection of the Anti-Kickback safe harbor for employee compensation.