Physician-Owned Hospitals: Conducting a Regulatory Compliance Review - 10 Immediate Steps
The Stark Act provides specific limitations applicable to physician ownership of a hospital, but physicians may invest in hospitals under an exception to the Act known as the "whole hospital exception." Also, Section 6001 of the Patient Protection and Affordable Care Act creates additional requirements to and limitations on the whole hospital exception.
It is important that physician-owned hospitals conduct periodic reviews of their compliance with the Anti-Kickback Statute, the Stark Act and other key regulatory programs. Physician-owned hospitals should also have a process in place to review, approve and monitor all arrangements with referral sources, especially given the current increased enforcement trend concerning physician/hospital relationships.
1. Comprehensive compliance plan. A physician-owned hospital should have in place a comprehensive compliance plan. The compliance plan should consist of several elements, including a written compliance manual, designation of a compliance officer, periodic employee training and education, a mechanism for receiving and responding to employee complaints, the development of a system to respond to allegations of improper or illegal activities, enforcement of disciplinary action against employees, the implementation of audits and/or evaluation techniques to monitor compliance, attendance by hospital leadership at compliance seminars, and background checks on all employees and physicians.
2. Stark and Anti-Kickback compliance generally. Each hospital should conduct a review of all payment arrangements with physicians and other referral sources for compliance with the Stark Act and the Anti-Kickback Statute. This would include a review of all contracts between the hospital and its referral sources, including, but not limited to, medical director agreements, call coverage arrangements, lithotripsy agreements, lease agreements with physicians, employment agreements, management agreements, buy-in and redemption documents, and any internally or externally created fair market value documentation to support such arrangements. In addition, we suggest that the hospital's policies and procedures be reviewed periodically for Stark Act and Anti-Kickback Statute compliance.
3. Billing and coding audits. We recommend periodic billing and coding audits to ensure compliant billing practices. At least annually, an outside firm should be utilized to perform a sample review of the hospital’s billing and coding efforts, to ensure compliance with billing and coding rules. Internally, this effort should be supplemented a number of times per year. And since billing and coding remain a key focus of investigative efforts, a disproportionate amount of attention should be spent on reviewing and improving billing and coding efforts.
4. Disclosures to patients and patient safety. Section 6001 of PPACA, the regulations promulgated thereunder and the regulations governing provider agreements include various disclosure-related requirements. Physician-owned hospitals are required to adopt a disclosure program, as follows:
i. Patient notice by hospital. The hospital should furnish written notice to each patient at the beginning of such patient's hospital stay or outpatient visit, informing such patient that the hospital is physician owned. The notice should (1) state that the hospital meets the federal definition of a physician-owned hospital and (2) state that a list of the hospital’s owners or investors who are physician owners is available upon request.
ii. Patient notice by physician. The hospital should require each referring physician who is a member of the hospital's medical staff to agree to provide written notice at the time of referral, except in emergency situations, of his or her and any treating physician's interest in the hospital. The medical staff bylaws for the hospital should reflect this requirement.
iii. Notice if 24/7 coverage unavailable. The hospital should disclose, prior to patient admission, if it does not have a physician available on premises to provide care 24 hours a day, 7 days per week; indicate how the hospital will meet the medical needs of an emergency condition; and obtain a signed acknowledgment of understanding from the patient before providing services.
iv. Advertising. The hospital must disclose in all public advertising, including websites, billboards and radio advertisements, that the hospital is physician owned. Website disclosures should list all physician owners.
5. Referral restrictions and minimum case issues. Physician-owned hospitals are prohibited from conditioning physician ownership interest either directly or indirectly on such physician owner's influence to refer to the hospital or on such physician owner's generation of business for the hospital. The hospital's operating agreement and other governing documents should be examined to ensure that physician owners are not required to generate business.
6. Investments, distributions and loan restrictions. Section 6001 includes various guidelines related to ownership interests held by physicians that are intended to ensure that such interests are bona fide investments. A compliance audit should include a review of the hospital’s governing documents and its policies and procedures for the following:
i. Physician ownership limitations. The percentage of the value of interests held in a physician-owned hospital by physician owners in the aggregate may not exceed the percentage held by its physician owners on March 23, 2010. This percentage may fluctuate, and additional physicians may be admitted as physician owners, so long as the total ownership held by physicians remains under the March 23, 2010, percentage.
ii. Distributions. Distributions from a physician-owned hospital must be made in direct proportion to the ownership interests of the owners and investors and cannot be based on a physician’s volume of referrals or generated business.
iii. Other investments and treatment of non-owner physicians. Section 6001 also requires that physician owners not receive additional benefits because of ownership or investment. Compliance with these provisions was required as of Sept. 23, 2011. Interest offers cannot be made to physician owners on terms more favorable than the terms offered to persons who are not physician owners. In addition, any joint ventures should be monitored closely to ensure that physician owners are not offered preferential terms. Physician owners may not receive any direct or indirect guaranteed receipt of or right to purchase other business interests related to the physician-owned hospital, and no hospital may offer a physician owner or investor the opportunity to purchase or lease any property under hospital, owner or investor control on more favorable terms than what is offered to a non-physician owner.
iv. Loans. A physician-owned hospital and its physician owners are prohibited from directly or indirectly guaranteeing a loan, making payment toward a loan or otherwise subsidizing a loan for any physician owner or any group of physician owners that relates to acquiring any interests in the hospital.
7. Limitations on facility expansion. Section 6001 prohibits physician-owned hospitals from increasing their aggregate number of operating rooms, procedure rooms and beds above the number that each hospital maintained as of March 23, 2010. However, a physician-owned hospital may reallocate its beds, so long as the aggregate bed number remains the same. A hospital may also apply for an exception from this limitation, which could allow for up to a 200 percent expansion on such hospital's main campus. CMS will issue specific guidance in 2012 related to the process for applying for an exception.
8. Annual reporting requirements. Under Section 6001(a), an annual report must be submitted to CMS describing direct and indirect ownership and investment interests by physicians in a physician-owned hospital. This report must contain (i) a detailed description of the identity of each physician owner and of other owners or investors in the hospital and (ii) a detailed description of the nature and extent of all ownership and investment interests in the hospitals. Indirect ownership of interests in the hospital by immediate family members must also be disclosed in this report. CMS has decided to delay implementation of this report, and instead focus on implementation of the other requirements of Section 6001. CMS has not provided an anticipated implementation date related to this reporting requirement. Hospitals should monitor any updates related to this requirement and ensure that each hospital is prepared to comply if and when CMS finalizes this disclosure requirement.
9. Enforcement and audits. The secretary of the Department of Health and Human Services is required to establish policies and procedures to ensure compliance with the Section 6001 requirements and may perform unannounced site reviews of physician-owned hospitals. By not later than May 1, 2012, the Secretary is also required to conduct audits to determine if physician-owned hospitals are in compliance with Section 6001. If a hospital undergoes a site review or audit by CMS or the Office of Inspector General, the opportunity to remedy any issues and minimize potential liability has generally passed. Thus, we recommend that our hospital clients perform periodic internal audits to appropriately prepare for an outside audit or investigation and minimize exposure to the maximum extent possible.
10. Medical device supply relationships. Physician-owned distributorships or PODs present particular regulatory concern under the Anti-Kickback Statute, particularly if their primary source of revenue is from physician-owner referrals. The OIG has included specific discussion in the 2012 OIG Work Plan related to spinal implant PODs. The OIG will be investigating PODs in 2012 and notes, "Congress has expressed concern that PODs could create conflicts of interest and safety concerns for patients." Physician-owned hospitals should determine whether they are a party to any supply relationships with PODs and perform a risk assessment to determine whether the level of risk presented by such a relationship is acceptable to the board and owners.
More Articles on Physician-Owned Hospitals:
PHA Urges Congress to Revise Section 6001 of Healthcare Reform to Meet Patient Demand
Republican Bill Would Lift Restraints From Physician-Owned Hospitals
© Copyright ASC COMMUNICATIONS 2015. Interested in LINKING to or REPRINTING this content? View our policies by clicking here.
New from Becker's Hospital Review
100 Great Hospitals in America 2015