Medicare Program; Home Health Agency Physician Certification Regulations

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Part 424

[BPD-875-NC]

Medicare Program; Home Health Agency Physician Certification

Regulations

AGENCY: Health Care Financing Administration (HCFA), HHS.

ACTION: Decision to reexamine interpretations, with comment.

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SUMMARY: This document with comment period announces our decision to

reexamine our recent interpretations of the Medicare regulations

pertaining to indirect compensation arrangements between home health

agencies (HHAs) and physicians who certify or recertify the need for

home health services or establish or review the home health plan of

care. We are withdrawing recent interpretations regarding indirect

compensation arrangements where the physicians are salaried employees

of, or have a contractual arrangement to provide services for, an

entity that also owns the HHA. This will enable us to evaluate our

recent interpretations of these regulations and related provisions of

section 1877 of the Social Security Act to ensure consistent

application of Medicare policy among providers of services.

DATES: Effective Date: This document is effective on December 5, 1997.

Comment Date: Written comments will be considered if we receive

them at the appropriate address, as provided below, no later than 5:00

p.m. on January 5, 1998.

ADDRESSES: Mail written comments (an original and three copies) to the

following address: Health Care Financing Administration, Department of

Health and Human Services, Attention: BPD-875-NC, P.O. Box 7517,

Baltimore, MD 21244-0517.

If you prefer, you may deliver your written comments (an original

and three copies) to one of the following addresses:

Room 309-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW,

Washington, DC 20201 or

C5-09-26, 7500 Security Boulevard, Baltimore, MD 21244-1850.

Because of staffing and resource limitations, we cannot accept

comments by facsimile (FAX) transmission. In commenting, please refer

to file code BPD-875-NC. Comments received timely will be available for

public inspection as they are received, generally beginning

approximately 3 weeks after publication of a document, in Room 309-G of

the Department's offices at 200 Independence Avenue, SW, Washington,

DC, on Monday through Friday of each week from 8:30 a.m. to 5 p.m.

(phone: (202) 690-7890).

Copies: To order copies of the Federal Register containing this

document, send your request to: New Orders, Superintendent of

Documents, P.O. Box 371954, Pittsburgh, PA 15250-7954. Specify the date

of the issue requested and enclose a check or money order payable to

the Superintendent of Documents, or enclose your Visa or Master Card

number and expiration date. Credit card orders can also placed by

calling the order desk at (202) 512-1800 or by faxing to (202) 512-

2250. The cost of each copy is $8.00. As an alternative, you can view

and photocopy the Federal Register document at most libraries

designated

[[Page 59819]]

as Federal Depository Libraries and at many other public and academic

libraries throughout the country that receive the Federal Register.

FOR FURTHER INFORMATION CONTACT:

Jennifer Carter, (410) 786-4615.

SUPPLEMENTARY INFORMATION:

I. Background

Section 903 of the Omnibus Reconciliation Act of 1980 amended

sections 1814(a) and 1835(a) of the Social Security Act (the Act) to

prohibit the certification of need for home healthy services under

Medicare, and the establishment and review of a home health plan of

care for those services, by a physician who has a significant interest

in, or a significant contractual or significant financial relationship

with, the HHA that provides those services. These amendments were

incorporated into the regulations at 42 CFR 405.1633(d) (which was

redesignated as Sec. 424.22(d)), by an interim final rule with comment

period that was published in the Federal Register on October 26, 1982

(47 FR 47388), and was made effective on November 26, 1992.

On June 30, 1986, we published a final rule in the Federal Register

(51 FR 23541) that confirmed the provisions of the October 1982 rule,

and clarified that under the term, ``significant interest or a

significant financial or contractual relationship'' with the HHA, we

intended to include salaried employment. This clarification was made

effective on August 29, 1986.

The only exceptions to the home health regulations were

uncompensated officers or directors of an HHA, HHAs operated by

Federal, State, or local governmental authority, and sole community

HHAs. The home health physician certification restrictions of sections

1814(a) and 1835(a) of the Act and Sec. 424.22(d) of the regulations

have not been revised or updated since 1986.

On December 19, 1989, section 6204 of the Omnibus Budget

Reconciliation Act of 1989 added section 1877, ``Limitation on Certain

Physician Referrals,'' to the Act. In general, section 1877 of the Act

prohibits a physician who has a financial relationship with an entity

that furnishes clinical laboratory services (or a physician with an

immediate family member who had such a relationship) from making

referrals to the entity for clinical laboratory services for which

Medicare may otherwise pay.

On August 10, 1993, section 13562 of the Omnibus Budget

Reconciliation Act of 1993 (OBRA '93) revised section 1877 of the Act

to cover 10 additional designated health services, including home

health services, beginning with referrals made after December 31, 1994.

The statute was also revised to provide for certain exceptions to the

prohibition, including a bona fide employment exception subject to

certain conditions. Additionally, referrals are defined in part to

include the request or establishment of a plan of care by a physician

which includes the provision of a plan of care by a physician which

includes the provision of a designated health service. On August 14,

1995, we published a final rule with comment in the Federal Register

(60 FR 41914) to implement the amendments of OBRA '93 that apply to

referrals for clinical laboratory services and which were effective

retroactively to January 1, 1992. In this final rule we indicated our

intention to rely on the language and interpretations of the final rule

when reviewing referrals in appropriate cases for the 10 designated

health services. Appropriate cases were defined as those in which our

interpretation of the statute clearly applied equally to clinical

laboratory services and other designated health services. We are

currently developing a proposed rule to implement the provisions of

section 1877 of the Act which were effective January 1, 1995, and

relate to the additional designated health services.

It is our intention to reconcile the statutory prohibitions in

sections 1814(a) and 1835(a) of the Act concerning physician

certification of home health services with the related section 1877

prohibitions as part of the proposed regulations implementing the OBR

'93 changes to section 1877. This proposed regulation is in the final

stages of development and should be published in the very near future.

In the meantime, we have received numerous inquiries about the

applicability of the current home health prohibitions at Sec. 424.22

regarding hospital-employed physicians certifying and recertifying the

need for home health services provided by the hospital-owned HHA. We

recently released an interpretation of Sec. 424.22(d)(3)(ii) and

indirect compensation in the case where a physician is employed by the

hospital that also owns the HHA. In that interpretation of Sec. 424.22,

we stated that hospital-employed physicians are prohibited from

certifying or recertifying the need for home health services for the

hospital-owned HHA. Furthermore, we stated that if the HHA is

separately incorporated and not included on the hospital's cost report,

the hospital-employed physicians are permitted to certify or recertify

the need for home health services for the hospital-owned HHA. We also

released an interpretation that indicated that payment of compensation

to a physician by the HHA's parent or related organization would very

likely be considered to be paid by the HHA.

As we begin to reconcile the home health prohibitions with the

section 1877 prohibitions, we have concluded that our recent

interpretations of this regulation have brought about unintended

consequences affecting rural areas, integrated delivery systems, and

current medical practice and may be inconsistent with the provisions of

section 1877. Therefore, we are going to address ``indirect

compensation'' and the relationship between the HHA regulations and the

section 1877 provisions in the separate proposed rule that is in the

final stages of development and should be published in the very near

future. We will address the scope of an indirect compensation

arrangement where the physicians are salaried employees of, or have a

contractual arrangement to provide services for, the entity that owns

the HHA in that proposed regulation. In the meantime, we withdraw these

recent interpretations concerning indirect compensation under

Sec. 424.22(d).

II. Purpose of This Notice

We have decided to reexamine appropriate provisions of section 1877

of the Act and the home health regulations as they pertain to indirect

compensation arrangements between physicians and home health agencies.

We are concerned with the situation in which the physician receives

compensation from the same entity that also owns the home health

agency. Pending that evaluation, we have decided to withdraw recent

interpretations of Sec. 424.22(d)(3)(ii) as it applies to certification

and recertification or establishment and review of plans of care by

physicians who are salaried employees of, or have a contractual

arrangement to provide services for, an entity that also owns the HHA.

Instead, we will address the issue of indirect compensation, applicable

to the health services specified in section 1877 of the Act, in the

proposed rule that is in the final stages of development and should be

published in the Federal Register in the very near future. In the

meantime, we withdraw these recent interpretations concerning indirect

compensation under 424.22(d).

We remain concerned about inappropriate physician certification for

home health services. However, we are also concerned about the effect

that the recent interpretations of the home

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health regulation at Sec. 424.22(d)(3)(ii), as it applies to indirect

salaried employment or contractual arrangements, may have on rural

areas where the hospital or other entity is so pervasive a presence in

the community that, in addition to owning the home health agency, it

also employs the majority of the physicians.

We have asked the Medicare fiscal intermediaries to cooperate with

the Office of Inspector General to look into the referral patterns of

hospitals that own facilities providing ancillary services, including

home health services.

III. Other Required Information

A. Executive Order 12866 Review

In accordance with provisions of Executive Order 12866, this notice

with comment period was received by the Office of Management and

Budget.

B. Collection of Information Requirements

This notice with comment period does not impose information

collection and recordkeeping requirements. Consequently, it need not be

reviewed by the Office of Management and Budget for purposes of the

Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.).

C. Response to Comments

Because of the large number of items of correspondence we normally

receive on Federal Register documents published for comment, we are not

able to acknowledge or respond to them individually. We will consider

all comments we receive by the date and time specified in the DATES

section of this notice, and, if we proceed with a subsequent document,

we will respond to the comments in that document.

(Authority: Secs. 1102, 1814(a), 1835(a), 1871, and 1877 of the

Social Security Act (42 U.S.C. 1302, 1395f(a), 1395(a), 1395hh, and

1395nn))

(Catalog of Federal Domestic Assistance Program No. 93.773

Medicare--Hospitals Insurance Program; and Program No. 93.774,

Medicare--Supplementary Medical Insurance Program)

Dated: October 17, 1997.

Nancy-Ann Min DeParle,

Deputy Administrator, Health Care Financing Administration.

Dated: October 23, 1997.

Donna E. Shalala,

Secretary.

[FR Doc. 97-29071 Filed 11-4-97; 8:45 am]

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