[Federal Register: December 24, 2003 (Volume 68, Number 247)]
[Rules and Regulations]
[Page 74491-74492]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24de03-17]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Part 411
[CMS-1809-F4]
RIN 0938-AM21
Medicare and Medicaid Programs; Physicians' Referrals to Health
Care Entities With Which They Have Financial Relationships: Extension
of Partial Delay of Effective Date
AGENCY: Centers for Medicare & Medicaid Services (CMS), DHHS.
ACTION: Final rule; extension of partial delay in effective date.
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SUMMARY: This final rule further delays for 6 months, until July 7,
2004, the effective date of the last sentence of 42 CFR 411.354(d)(1).
This section was promulgated in the final rule entitled ``Medicare and
Medicaid Programs; Physicians' Referrals to Health Care Entities With
Which They Have Financial Relationships,'' published in the Federal
Register on January 4, 2001. A 1-year delay of the effective date of
the last sentence in this section was published in the Federal Register
on December 3, 2001. A 6-month delay, until July 7, 2003, was published
in the Federal Register on November 22, 2002. An additional 6-month
delay, until January 7, 2004, was published on April 25, 2003. This
further extension of the delay in the effective date of that sentence
will give us additional time to reconsider the definition of
compensation that is ``set in advance'' as it relates to percentage
compensation methodologies in order to avoid unnecessarily disrupting
existing contractual arrangements for physician services. Accordingly,
the last sentence of Sec. 411.354(d)(1), which would have become
effective January 7, 2004, will not become effective until July 7,
2004. We expect that the definition of ``set in advance'' will be
addressed definitively before July 7, 2004 in a final rule with comment
period, entitled ``Medicare Program; Physicians' Referrals to Health
Care Entities With Which They Have Financial Relationships'' (Phase
II).
DATES: Effective date: The effective date of the last sentence in Sec.
411.354(d)(1) of the final rule published in the Federal Register on
January 4, 2001 (66 FR 856), is delayed to July 7, 2004.
FOR FURTHER INFORMATION CONTACT: Karen Raschke, (410) 786-0016.
SUPPLEMENTARY INFORMATION: This Federal Register document is available
from the Federal Register online database through GPO Access, a service
of the U.S. Government Printing Office. The Web site address is: http://www.access.gpo.gov/nara/index.html
.
In addition, the information in this final rule will be available
soon after publication in the Federal Register on our MEDLEARN Web
site: http://cms.hhs.gov/medlearn/refphys.asp.
I. Background
The final rule, entitled ``Medicare and Medicaid Programs;
Physicians' Referrals to Health Care Entities With Which They Have
Financial Relationships,'' published in the Federal Register on January
4, 2001 (66 FR 856), interpreted certain provisions of section 1877 of
the Social Security Act (the Act). Under section 1877, if a physician
or a member of a physician's immediate family has a financial
relationship with a health care entity, the physician may not make
referrals to that entity for the furnishing of designated health
services (DHS) under the Medicare program, and the entity may not bill
for the services, unless an exception applies. Many of the statutory
and new regulatory exceptions that apply to compensation relationships
require that the amount of compensation be ``set in advance.'' Section
411.354(d)(1) of the final rule defines the term ``set in advance.''
The last sentence of Sec. 411.354(d)(1) reads: ``Percentage
compensation arrangements do not constitute compensation that is `set
in advance' in which the percentage compensation is based on
fluctuating or indeterminate measures or in which the arrangement
results in the seller receiving different payment amounts for the same
service from the same purchaser.'' Many of the comments we received
regarding the January 4, 2001 physician self-referral final rule
indicated that physicians are commonly paid for their professional
services using a formula that takes into account a percentage of a
fluctuating or indeterminate measure (for example, revenues billed or
collected for physician services). According to the
[[Page 74492]]
commenters, this compensation methodology is frequently used by
hospitals, physician group practices, academic medical centers, and
medical foundations. Several commenters pointed out that this aspect of
the final rule, which is applicable to academic medical centers and
medical foundations (among others), is inconsistent with the
compensation methods permitted under the statute for many physician
group practices and employed physicians (that is, neither section
1877(h)(4)(B)(i) of the Act nor section 1877(e)(2) of the Act contains
the ``set in advance'' requirement). We understand that hospitals,
academic medical centers, medical foundations and other health care
entities would have to restructure or renegotiate thousands of
physician contracts to comply with the language in Sec. 411.354(d)(1)
regarding percentage compensation arrangements.
Accordingly, we published a 1-year delay of the effective date of
the last sentence in Sec. 411.354(d)(1) in the Federal Register on
December 3, 2001 (66 FR 60154), an additional 6-month delay in the
effective date on November 22, 2002 (67 FR 70322), and a further 6-
month delay on April 25, 2003 (68 FR 20347) in order to reconsider the
definition of compensation that is ``set in advance'' as it relates to
percentage compensation methodologies.
II. Provisions of this Final Rule
To avoid any unnecessary disruption to existing contractual
arrangements while we consider modifying this provision, we are further
postponing, for an additional 6 months, until July 7, 2004, the
effective date of the last sentence of Sec. 411.354(d)(1). This delay
is intended to avoid disruptions in the health care industry, and
potential attendant problems for Medicare beneficiaries, which could be
caused by allowing the last sentence of Sec. 411.354(d)(1) to become
effective on January 7, 2004. In the meantime, compensation that is
required to be ``set in advance'' for purposes of compliance with
section 1877 of the Act may continue to be based on percentage
compensation methodologies, including those in which the compensation
is based on a percentage of a fluctuating or indeterminate measure. We
note that the remaining provisions of Sec. 411.354(d)(1) will still
apply and that all other requirements for exceptions must be satisfied
(including, for example, the fair market value and ``volume and value''
requirements.)
III. Waiver of Proposed Rulemaking
We ordinarily publish a notice of proposed rulemaking and invite
public comment on the proposed rule. This procedure can be waived,
however, if an agency finds good cause that the notice and comment
rulemaking procedure is impracticable, unnecessary, or contrary to the
public interest and if the agency incorporates in the rule a statement
of such a finding and the reasons supporting that finding.
Our implementation of this action without opportunity for public
comment is based on the good cause exception in 5 U.S.C. 553(b). We
find that seeking public comment on this action would be impracticable
and unnecessary. We believe public comment is unnecessary because we
are implementing this additional delay of effective date as a result of
our review of the public comments that we received on the January 4,
2001 physician self-referral final rule. As discussed above, we
understand from those comments and the comments we received on the
December 3, 2001 interim final rule that, unless we further delay the
effective date of the last sentence of Sec. 411.354(d)(1), hospitals,
academic medical centers, and other entities will have to renegotiate
numerous contracts for physician services, potentially causing
significant disruption within the health care industry. We are
concerned that the disruption could unnecessarily inconvenience
Medicare beneficiaries or interfere with their medical care and
treatment. We do not believe that it is necessary to offer yet another
opportunity for public comment on the same issue in the limited context
of whether to delay this sentence of the regulation. In addition, given
the imminence of the January 7, 2004 effective date, we find that
seeking public comment on this delay in effective date would be
impracticable because it would generate uncertainty regarding an
imminent effective date. This uncertainty could cause health care
providers to renegotiate thousands of contracts with physicians in an
effort to comply with the regulation by January 7, 2004 if the proposed
delay is not finalized until after the opportunity for public comment.
Thus, providing the opportunity for public comment could result in the
very disruption that this delay of effective date is intended to avoid.
(Catalog of Federal Domestic Assistance Program No. 93.773
Medicare--Hospital Insurance Program; Program No. 93.774, Medicare--
Supplementary Medical Insurance Program; and Program No. 93.778,
Medical Assistance Program)
Dated: September 29, 2003.
Thomas A. Scully,
Administrator, Centers for Medicare & Medicaid Services.
Approved: October 27, 2003.
Tommy G. Thompson,
Secretary.
[FR Doc. 03-31469 Filed 12-23-03; 8:45 am]
BILLING CODE 4120-01-P