Stark Regulations Released

Februrary 2001

It is rare that physicians of any type are eager to see publication of government regulations related to medical practice. For home care physicians, this may be one of those rare events!

The Department of Health and Human Services finally released the long-awaited regulations regarding physician self-referral. The regulations are the result of legislation originally authored by Rep. Pete Stark (R-Calif) in 1989 and then amended later in what was called Stark II. That legislation was created to respond to concerns about physicians' conflicts of interest when referring Medicare patients for a variety of services. There was anecdotal and some peer-reviewed medical literature that suggested that physicians made excessive or at least greater numbers of referrals for services or products such as radiology tests, laboratory tests, or durable medical equipment when the referring physician had a financial interest in the organization providing the service or product. Home health referrals were added later to the list of "designated health services" at risk for excessive physician self-referral.

The regulations, published in the Federal Register on January 4, 2001 (pp. 856-965), finally clarify what is a designated health service and under what circumstances physicians can have a financial relationship with an organization and still make referrals of Medicare patients for services or products provided by that organizations. For home care physicians, the regulations answer the important question about how to work with and for a home health agency (e.g., as a medical director) and still make referrals to that agency. Until now, Medicare rules basically prohibited compensation in excess of $25,000 per year from home health agency to a physician who made referrals to that agency. The Academy had focused attention on this issue in its comments on the regulations in 1998, and is happy to see that this matter has finally been addressed.

The new rules on this particular subject are clear. The regulation, titled 42 CFR 424.22 B (d), states: "The need for home health services to be provided by an HHA may not be certified or recertified, and a plan of treatment may not be established and reviewed, by any physician who as a financial relationship, as defined in Section 411.351 of this chapter, with that HHA, unless the physician's relationship meets one of the exceptions in section 1877 of the Act….

Remarkably, this is generally good news. The exceptions include well-defined, fair employment as a medical director or as a clinician who sees patients at home for the home health agency. For example, the compensation has to be set in advance, market priced, and not related to the number of referrals for home health services. These regulations remove the $25,000 cap on such compensation, which has been a barrier to full or even half time medical direction for home health agencies in the past. These regulations also allow HHA organized medical practices, such as exist at the VNA of Philadelphia, to refer to and work collaboratively with the HHA where those physicians are employed. This provision of the regulations is effective February 5, 2001.

The regulations also address one other major issue for physicians who practice primarily in the home: providing designated services during visits. The regulations specifically state that the physician (or a nurse or technician accompanying the physician) can provide designated services if that service is provided contemporaneously with a non-designated service (e.g., history taking and physical examination) provided by the physician in the home. This is important for two reasons. First, the regulations specifically recognize a physician "whose principal medical practice consists of treating patients in their private homes." Second, it makes it clear that designated services, such as performing laboratory tests, providing a walker, or doing an X-ray examination, are permitted even though they are not performed in the physician's office.

Section 411.355 (b) (6) Special rule for home care physicians.

The regulations, except the item about home health referrals described above, is subject to a 90-day comment period and will not officially become effective until January 4, 2002.

The issue of services not provided contemporaneously with a non-designated service was not addressed in these regulations, but will be covered in the next phase of rule making. Comments regarding this issue are requested.

These regulations offer opportunities for innovation in home care medical practice that are unprecedented. The benefits from physician involvement in home care for HHA that are paid prospectively can be tapped by HHA and meaningfully employed physicians. The continuous improvements in portability of medical testing equipment can be applied in the home setting by physicians who specialize in home care. The future for patients who can or should receive medical care in their homes is promising.