The most far reaching change in the Stark Law Phase
Physician SITS Provisions
Under the Phase
Subsequent to the publication of the Phase
In the IPPS Proposed Rule,
Under the first proposal, the physician would not stand in the shoes of his or her physician organization by virtue of a compensation arrangement, if that compensation arrangement satisfied the employment, personal services or fair market value exception. However, even if the physician does not “stand in the shoes,” the physician could still have an indirect compensation arrangement with a downstream provider of designated health services (DHS entity). Additionally, if the physician were also an owner of the physician organization, SITS would still apply.
The second approach proposed by
Providers should consider providing comments to
DHS Entity SITS Provisions
The proposed DHS entity SITS rule would be a corollary to the physician SITS rule adopted in the Phase
The proposed amendment is simple: a DHS entity stands in the shoes of an organization in which it has a 100 percent ownership interest, and is deemed to have the same compensation arrangements as the organization that it owns. The rule applies to any type of entity (LLC, partnership or corporation). Although
- First, apply the physician “stand in the shoes” provisions to the physician and his or her physician organization.
- However, if the physician “stand in the shoes” results in only one financial relationship remaining between the DHS entity and the collapsed physician/physician organization and that relationship is an ownership interest, the physician “stand in the shoes” would not be applied, and the entity “stand in the shoes” instead would be applied first.
- If more than two organizations remain after first applying the physician “stand in the shoes,” then apply the entity “stand in the shoes” provisions.
- Is the employment exception the only available exception with respect to DHS referrals to the hospital? If so, then compensation must be consistent with fair market value and cannot take into account referrals to the hospital, but could still indirectly reflect DHS referrals to the group.
- Is the employment exception the only available exception for DHS referrals to the group practice as well as the hospital? If so, then the rule effectively eliminates the ability of a hospital-owned group practice to take advantage of the rules applicable to group practices that furnish DHS. Depriving hospital-owned group practices of the possibility of distributing the group’s DHS by qualifying as a group practice and using the in-office ancillary services exception (rather than the employment exception) for intra-group referrals of DHS would be a significant change. While CMS may be seeking to address the risk of abuse where a hospital-owned group practice compensates its physicians in excess of fair market value, the Federal Anti-kickback Law would appear to be an adequate safeguard against such abuse where the compensation could be viewed as coming indirectly from the hospital and therefore not be protected by the employment safe harbor.
Of course, in many cases, a hospital and physician group have a “sister corporation” relationship in a health system corporate structure rather than having a parent-subsidiary relationship. In such cases, the hospital does not stand in the shoes of the physician group, so the traditional indirect compensation analysis is preserved.
Although CMS appears intent upon expanding the scope of the SITS provisions, the proposed provisions are clearly still in the formative stage, and CMS has asked for comments and suggestions on the concepts and specific application of SITS in particular situations. Providers should take this opportunity to identify issues and problems so that they can be considered and addressed in the final rule. Providers should also consider reviewing their current arrangements in the context of the proposed changes to the physician SITS and the proposed DHS entity SITS, and should take these proposals into account in planning and implementing new arrangements with physicians.