QUESTION: “Since the new Stark regulations came out late last year, can we still require our employed physicians to refer patients to our hospital or other providers in our health system?”
ANSWER: Yes. The amendment to the Stark regulations set forth a separate section on “directed referrals” at 42 CFR §411.354(d)(4) which permits physician compensation in employment relationships, personal service arrangements and managed care contracts to be conditioned on the physician’s referral of patients to a particular provider, practitioner or supplier as long as the physician is paid fair market value, agreement is in writing and subject to the following exceptions: (i) the patient expresses a preference for a different provider, practitioner or supplier, (ii) the patient’s insurer determines the provider, practitioner or supplier, or (iii) the referral is not in the patient’s best medical interests in the Physician’s judgment. The required referrals must relate solely to the services covered by the contract in question.
The regulations go on to say that neither the existence of the arrangement or the amount of compensation can be contingent on the directed referrals. However, an established percentage or ratio of the physician’s referrals to the designated providers can be required. In other words, a directed referral provision in an employed physician’s contact could not provide that the physician’s compensation would be cut if the physician does not refer patients to the hospital, but it could require that a certain percentage of the physician’s patients who require hospitalization are sent to the hospital – subject always to the three exceptions.
But beware! Although the Stark regulation says that personal services arrangements can contain a directed referral requirement, there is no corresponding directed referral language in the Anti-kickback safe harbors. The only protection there would be the bona fide employment exception, so requiring independent contractors to refer to the hospital would be risky.
Want to know more about this or other provisions in the new Stark regulations? Contact Dan Mulholland or Henry Casale or call 412-687-7677 to schedule an appointment.