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Health Care Reform Adds Requirements for Physicians

Joyce McLaughlin

Although the Patient Protection and Affordable Care Act of 2010 (PPACA), also referred to as the health care reform act, is currently being challenged on constitutional grounds, and threatened with non-funding and piecemeal repeal; the fact remains that many portions of the Act are already effective and may be enforced.  Several sections of PPACA contain requirements that affect physicians under existing broad federal regulations relating to fraud and abuse.  In addition, provisions of the Act are being incorporated into regulations.  Three of these requirements are discussed below: stark law, false claims act, and DME and home health.

Stark.  First, Section 6003 of PPACA amended the federal law prohibiting Physician Self-Referral (known as the Stark Law) by adding a disclosure requirement to the in-office ancillary services exception.  This provision relates to physician practices furnishing advanced imaging services, such as MRI, CT, PET, and potentially other advanced diagnostic imaging services.  On Nov. 29, 2010, CMS published the Physician Fee Schedule Final Rule in the Federal Register, finalizing the applicable regulations with significant modification from those originally proposed.

Under the PFS Final Rule, a physician must comply with added requirements if a physician intends to refer a patient who is a Medicare beneficiary to the physician’s sole practice or group practice for a MRI, CT, or PET imaging test.  Such a referral is normally made in keeping with the requirements for the exception for in-office ancillary services in the Stark regulations. The new regulation adds a requirement for the physician to provide an additional written notice to the patient.  The notice must inform the patient in reasonably understandable language that the patient may receive the service from another supplier.  The notice must include a list of other suppliers who provide the same service (the MRI, CT, or PET) which are located within a 25-mile radius of the physician’s office.  The list of suppliers only needs to include five suppliers within a 25-mile radius of the referring physician’s office.  It must include each supplier’s address and phone number. If there are fewer than five suppliers in that area, the list must include all of those suppliers.

“Supplier” specifically has the meaning of a physician or other practitioner, or an entity other than a “provider,” that furnishes health care services under Medicare.[1] The commentary to the regulation specifically permits inclusion of “providers” (hospitals) on the list, but only if the requisite number of “suppliers” is included.  Other suggestions in the commentary include that the list be updated annually for accuracy, and that the physician would be prudent to establish a method by which the physician shows compliance with the requirement, such as making a note in the patient’s chart that the document had been given.  These suggestions are not actually required as part of the final rule, but should be considered as best practices for internal policies.

Since the proposed rule had included requirements for a list of 10 suppliers, a written estimation of the distance of each supplier from the physician’s office, and that the notification be signed by the patient and maintained in the patient’s medical record, the final rule should be less burdensome than the proposed rule.

In summary, when relying on the in-office ancillary services exception to the Stark Law with respect to a referral for MRI, CT, or PET to his or her group practice, at the time of referral the physician must provide the following:

  1. A reasonably understandable written notification that the patient may obtain the services from someone other than the referring physician or someone in the referring practice; and
  2. A list of five suppliers who furnish those services within a 25-mile radius of the physician’s office location including the names, addresses, and telephone numbers of the suppliers.

This new disclosure requirement for in-office ancillary services exception applies to services furnished on or after Jan. 1, 2011.  The rule appears in the Code of Federal Regulations at 42 CFR 422.351(b)(7).

Neither the statutory language of Section 6003 of PPACA nor the final rule made any changes to the applicability of the Physician Self-Referral prohibition to designated health services furnished to Medicare beneficiaries. Technically, therefore, the notification is required to be given only to those patients that the self-referral prohibition affects, and would not be required for insured or self-pay patients.  As a matter of best practices and because the physician may not always know whether the patient might be a Medicare beneficiary even if he or she has other insurance, it would be prudent to give the notification to all patients at the time of the referral.


False Claims Act.  Another PPACA requirement expands previous legislation relating to the False Claims Act.  In a two-step process, the False Claims Act was amended, creating potential new exposure for providers and suppliers who bill Medicare and Medicaid. The legislation added new provisions on “overpayments” which essentially convert an overpayment into a false claim if it is not refunded to Medicare in a timely manner.  For step one, the Fraud Enforcement and Recovery Act of 2009 (“FERA”) revised the False Claims Act to make a knowing and intentional retention of an “overpayment”, a violation of the False Claims Act.


For step two, PPACA Section 6402(a) expanded on FERA by defining “overpayment” to be any funds that a person receives or retains under Medicare or Medicaid to which the person, after applicable reconciliation, is not entitled. PPACA also provided that the overpayment must be reported and returned to the appropriate government agency, carrier, intermediary, or contractor no later than 60 days from the date on which the overpayment was identified, or the date on which any corresponding cost report is due, whichever is later.  As part of the report, the provider must disclose in writing the reason for the overpayment. If not refunded timely, the government may consider it to be a false claim, which carries significant potential penalties.  PPACA gave the OIG the authority to impose civil monetary penalties and gave state Medicaid programs the authority to permissively exclude providers that knowingly fail to refund any identified overpayments.


These provisions raise a number of questions in practical application, such how to determine exactly when an overpayment is “identified.”  However, since False Claims Act liability is an added possibility, health care providers will need to review their compliance plans to increase focus on billing and reimbursement practices, on routine audits, and on processes to identify causes of overpayments, such as billing errors, lack of necessary documentation, or duplicate billing, among others.


DME and Home Health.  Third, PPACA added two provisions in an effort to curtail fraud in the provision of durable medical equipment and home health services.  Section 6405 requires that, for a Part B claim to be paid for a referral for durable medical equipment or home health services, the referring physician or eligible professional must be enrolled in the Medicare program.  The regulations applicable to this provision issued in May 2010 provided that a physician who had been enrolled as a Medicare provider but who had validly “opted-out” of the Medicare program (with and NPI number and a record in the PECOS system) would be an exception to this requirement.  These regulations also expanded this provision to apply to imaging services, lab, and specialist services.


In addition, Section 6407 of PPACA requires that physicians must conduct a face-to-face encounter with the patient within the six months prior to the order before the physician can certify eligibility for home health services or DME paid by Medicare.  Physicians are required to maintain documentation concerning orders or referrals for DME or home health services and submit to the Secretary of HHS if requested.  HHS may also determine other services to be covered by this requirement.


Summary. Given the current concern with curtailing fraud and abuse, it seems unlikely that these sections will be repealed.  Awareness of the new provisions and of additional regulations as they are issued will help a practice adjust its processes to stay abreast of these new conditions.




Joyce McLaughlin is an attorney and senior counsel member of Davis & Wilkerson, P.C., based in Austin, Texas.  Joyce specializes in health law, representing everything from large hospitals to small businesses.  She can be contacted at jmclaughlin@dwlaw.com.












[1] 42 CFR 400.202.  Provider means a hospital, a CAH, a skilled nursing facility, a comprehensive outpatient rehabilitation facility, a home health agency, or a hospice that has in effect an agreement to participate in Medicare, or a clinic, a rehabilitation agency, or a public health agency that has in effect a similar agreement but only to furnish outpatient physical therapy or speech pathology services, or a community mental health center that has in effect a similar agreement but only to furnish partial hospitalization services.



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