HIPPS final rule has many changes in store; start planning now

The Centers for Medicare and Medicaid Services (CMS) posted the final Hospital Inpatient Prospective Payment System Rules (HIPPS Final Rule), published on August 19. The HIPPS Final Rule contains a number of Stark Rules that will have a substantial impact on a number of joint venture arrangements. The effective date of many of these changes is October 1, 2009, and those with exposure should begin work to maintain compliance now.

The major components of the new rules that may impact imaging centers:

  • “Stand in the Shoes” Provisions: CMS notes that the final rules apply a more refined approach to the “stand in the shoes” provision that will simplify the analysis of financial relationships and reduce program abuse by bringing more relationships within the scope of the physician self-referral law. Under the final rules, only physicians who have more than a “titular” or nominal ownership or investment interest in their physician organizations will be required to stand in the shoes of those organizations. A physician’s ownership interest is titular where the physician is not entitled to receive any of the financial benefits.
  • While complying with a Stark exception will now be much easier for academic medical centers, integrated tax-exempt health care delivery systems, and physician organizations that are not owned by referring physicians, CMS also cautions that “such arrangements are highly suspect under the fraud and abuse laws and will be subject to close scrutiny. Depending on the circumstances, such arrangements could violate the physician self-referral law, constitute unlawful circumvention schemes, or violate the anti-kickback statute. Moreover, structuring an arrangement purposefully to evade restrictions on payments for referrals may be evidence of unlawful intent.”

  • “Set in Advance” and Amendments to Agreements: In the preamble to the new “stand in the shoes” rules discussed above, CMS states that it is reversing its prior position and permitting multiyear agreements to be amended after the first year of their terms without violating Stark’s “set in advance” requirement.
  • Percentage-Based and Per Click Leasing Arrangements: CMS narrows the scope of percentage-based compensation and specifically prohibits the use of percentage-based compensation formulae in the determination of the rental charges for the lease of office space or equipment. While percentage-based compensation for “personally performed physician services” remains permissible, CMS states that “…the use of percentage-based compensation formulae to determine rental charges for office space or equipment poses a heightened risk of program and patient abuse. For example, lease payments based on a percentage of revenues earned by the lessee provide incentive for the lessor to increase DHS referrals to the lessee so as to increase potentially the rental payment under the lease. In addition, fluctuating rental payments determined using a percentage-based formula may not result in fair market value payments (even if the formula itself is arguably reasonable), which also poses an increased risk of program or patient abuse.” CMS also severely restricts the use of unit-of-service-based (“per-click”) leasing arrangements. Both of these rules have a delayed implementation date of October 1, 2009.
  • Services Provided “Under Arrangements”: CMS revised the definition of “entity” with a delayed implementation date of October 1, 2009. This change will effectively eliminate referring physicians’ ability to own interests in such services.
  • Period of Disallowance: CMS has firmly established a rule that sets the outer limit of the period during which referrals are prohibited as a result of a financial relationship that fails to satisfy a Stark exception. Disallowance begins when the relationship fails to satisfy an exception and ends no later than the date that it satisfies an exception and the parties have returned any overpayments or paid any underpayments of compensation.
  • “Alternative Method for Compliance”: If a financial relationship fully complied with an applicable Stark exception, except with respect to a signature requirement, Medicare payments to the entity will be permitted if the signature requirement is complied with within 30 or 90 days after the commencement of the relationship. The longer period applies only if the failure to comply with the signature requirement was inadvertent.
  • Disclosure of Financial Relationships Report: CMS provides additional details about this survey of physician financial relationships that it proposes to send to up to 500 hospitals.
  • Burden of Proof: CMS clarifies that when a DHS entity appeals a claim for payment that was denied on the basis that it was furnished pursuant to a prohibited referral, the DHS entity has the burden of proving that the service was not furnished pursuant to a prohibited referral.

This is but a brief description of the rules that constitute more than 300 pages of text. Imaging centers and referring physicians should seek competent legal counsel to determine if these new rules will affect current arrangements or relationships.


Michael D. Miscoe, JD, CPC, CHCC, is a member of the National Advisory Board of the American Academy of Professional Coders.