Response to Solicitation of Comments: Services Provided "Under Arrangements" (Services Performed by an Entity Other Than the Entity That Submits the Claim)
Section 1877 of the Social Security Act, also known as the physician self-referral law, prohibits the following: (1) a physician from making referrals for certain designated health services (''DHS'') payable by Medicare to an "entity" with which he or she (or an immediate family member) has a direct or indirect financial relationship (an ownership/investment interest or a compensation arrangement), unless an exception applies; and (2) the entity from presenting or causing a claim to be presented to Medicare (or billing another individual, entity, or third party payor) for those referred services. The statute establishes a number of exceptions and grants the Secretary the authority to create regulatory exceptions for financial relationships that pose no risk of program or patient abuse.
In the FY 2009 IPPS final rule, we amended the definition of "entity" at 42 CFR §411.351 to clarify that "[a] person or entity is considered to be furnishing DHS" if it is the person or entity that has "performed services that are billed as DHS" or presented a claim to Medicare for the DHS (73 FR 48751). We declined to provide a specific definition of "perform" in the final rule, but stated that it should have its common meaning. In addition, we stated: "We do not consider an entity that leases or sells space or equipment used for the performance of the service, or furnishes supplies that are not separately billable but used in the performance of the medical service, or that provides management, billing services, or personnel to the entity performing the service, to perform DHS" (73 FR 48726). We delayed the effective date of the amendment to the definition of "entity" until October 1, 2009, in order to afford parties adequate time to restructure arrangements (73 FR 48721).
Solicitation of Comments
Following the publication of the IPPS final rule, we received a number of inquiries concerning whether we planned to issue additional guidance on the revised definition of entity, including the meaning of "performed services that are billed as DHS." To determine if further guidance was necessary, we solicited comments in the CY 2010 Physician Fee Schedule final rule (74 FR 61933–34). We drafted six issues on which we sought industry views, and we also requested alternative approaches or alternative criteria for the definition. In the solicitation of comments, we noted that we continued to believe that the changes set forth in the FY 2009 IPPS final rule effectuated our intent to minimize overutilization and anti-competitive behavior.
We received only nine comments responding to our solicitation, and there was no consistent approach regarding whether we should revise the definition of entity and if we did, the manner in which the definition should change. Several commenters asserted that a bright-line rule should be established to determine when a provider or supplier has "performed services that are billed as DHS," but commenters did not have a uniform approach for making this determination. Some commenters requested CMS to establish that a physician-owned company would be "performing" services billed as DHS if the company furnished a certain number of the following services: space, equipment, personnel, supplies, management services, or billing services. Others disapproved of this approach because they contended it fails to take into account the materiality of each item or service for which the DHS that is ultimately billed. One commenter requested that we adopt a "single performing entity" approach, which would mandate that only one provider or supplier would be able to "perform the services that are billed as DHS" in any situation. Another commenter asserted that the current definition of entity is unworkable and the changes made in the IPPS final rule should be withdrawn until further study is complete.
Several commenters recommended that we amend various regulatory definitions, including the definition of "entity," to allow physician-owned companies to provide certain services provided "under arrangements," such as radiation therapy for hospital inpatients, inter-operative neurological monitoring, dialysis provided to hospital inpatients, and personally performed services. The commenters suggested that such arrangements be carved out of the definition of entity and therefore not be subject to the physician self-referral prohibition. Another commenter contended that physician-owned implant and other medical device companies should be deemed to perform DHS when physician-investors order implantable medical devices for their patients through the physician-owned company.
The comments we received did not convince us to provide additional guidance or to engage in rulemaking to amend the definition of entity. We believe the guidance provided in the IPPS final rule is sufficient in most cases to identify when a provider or supplier has "performed the DHS." Providers and suppliers may seek further guidance through the advisory opinion process (42 CFR §411.370 through §411.389).