In May 2007, CMS publicized an initial notice of a new Stark audit survey, entitled the Disclosure of Financial Relationships Report (DFRR) (our July Client Bulletin on the background of the DFRR and description of the initial draft of the DFRR Stark audit survey, is available here: http://www. bricker.com/publications/articles/1125.pdf). After considering industry comments, CMS released a revised version of the DFRR Stark audit survey on September 14, 2007.
The DFRR continues to be a Stark compliance audit and is still applicable to general nonprofit hospitals (in addition to specialty hospitals), despite requests from the industry to reconsider the broad scope of the DFRR Stark audit survey and questions about whether this tool accomplishes the originally stated goal of analyzing physician ownership of specialty hospitals.
There are a number of important changes in the revised DFRR Stark audit survey:
60 Day Response Time
CMS has increased the response time to 60 days (from 45 days). A hospital receiving the DFRR Stark audit survey will have 60 days from the date of receipt to submit the completed DFRR Stark audit survey and all supporting documentation. Late responses will be subject to a penalty of $10,000 per day.
Renumbering of Worksheets
Due to adding, deleting and splitting Worksheets, there are now eight (8) Worksheets (previously there were only six (6)). Former Worksheet 6 (which was the only Worksheet applicable to hospitals without physician owners in the original survey) was split into two Worksheets and renumbered. Former Worksheet 6 Part I is now Worksheet 7. Worksheet 6 Part II is now Worksheet 8.
- Uniform Personal Services Arrangements. The revised DFRR Stark audit survey continues to require that hospitals submit copies of space leases, equipment leases, personal services agreements, and recruitment agreements as part of the responses to Worksheet 7 (formerly Worksheet 6 Part I). However, if the hospital utilizes a “uniform personal services arrangement” (e.g., a template contract used for multiple physicians), then the hospital may submit just one copy of the uniform personal services arrangement. Personal services arrangements are “uniform” if “all of the elements present in the arrangements are materially the same.” Hospitals must indicate on Worksheet 7 which physicians have a uniform personal services arrangement and whether or not it is signed. Note that it appears that this is only acceptable for personal services arrangements. That is, if the hospital has uniform leases with multiple physicians, copies of all of those leases must be submitted, and the hospital may not submit just one uniform lease.
- Information Required of Arrangements in Either Direction. The instructions to the revised DFRR Stark audit survey clarify that the requests for information about financial arrangements in Worksheet 7 (i.e., space leases, equipment leases, personal services agreements, and recruitment agreements) apply to arrangements in eitherdirection: hospital to physician or physician to hospital. Thus, for example, a lease in which a physician leased equipment to the hospital must be included.
- Request for Any Arrangement Implicated by Stark Exceptions. The instructions to the revised DFRR Stark audit survey now state that hospitals may not limit responses to worksheet 7 to those arrangements that the hospital believes fit safely within the Stark exceptions for space leases, equipment leases, personal services agreements, or recruitment agreements. Rather, hospitals must also include those arrangements implicated by the referenced exception. This could significantly increase the burden of responding – for example, if an arrangement was structured under the fair market value exception or isolated transactions exception, it might also implicate a referenced exception. Without guidance on what CMS means by “implicate,” this instruction could pose serious difficulties. This also underscores the critical need for hospitals to be reviewing and analyzing their current arrangements so that they know which Stark exceptions each arrangement falls under.
Worksheet 8: New Questions Related to Joint Ventures.
Three new questions have been added to Worksheet 8 (formerly Worksheet 6 Part II). The questions are: (1) whether physicians may make certain capital investments in the hospital; (2) whether the hospital made any loans or loan guarantees on behalf of any physician, and whether any physician made any loans or loan guarantees on behalf of the hospital; and (3) whether the hospital has made any initial investments, assessments, capital calls, or other types of payments on behalf of any physician. The first question will likely be inapplicable to most nonprofit acute care hospitals. However, the second and third questions may be applicable, especially in relation to joint ventures or other business organization activities. Most joint venture arrangements were outside the scope of the original DFRR Stark audit survey. However, hospitals will now need to review those and other arrangements to determine whether any loans or investments have been made to or on behalf of physicians.
CMS has indicated that the revised DFRR Stark audit survey will be sent to hospitals in November. CMS intends to send this Stark audit to 500 hospitals (nearly 10% of the hospitals in the country). While 290 hospitals “on the list” to get the survey have been identified, other hospitals should be aware that they too might receive this Stark audit. Though the response time has been slightly lengthened, it is still short and it should be noted that the 60 days to respond will come during holidays and year end if they survey is received in November. Hospitals should be working now to understand the revised Stark audit survey and ensure they are prepared to respond should they receive it.