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Considering Compliance in Out of Network Physician Owned Specialty Hospitals

florida healthcare law firm physician owned hospital compliance infoBy: Jacqueline Bain

Out of network physician owned specialty hospitals are unique in that there are less stringent legal requirements on the facility, but patient care obligations remain the same. This means that patient care must be prioritized over profits and all actions taken by the hospital and any physician investor must showcase that order of priority.

Given the amount of scrutiny placed in physician owned specialty hospitals in the past two decades, these facilities are well served to identify and implement a process to remedy compliance concerns. Even when a facility does not submit claims to any Federal health insurance provider and is out of network with all commercial insurance companies, it is still required to follow the laws of the state where it is located.

The best plan for surviving scrutiny in such situations is to have a plan. Proactively seek out applicable laws and regulations, and determine how your hospital will abide by them. Compliance can be tailored to fit your facility.

Overutilization and Self-Referrals

A physician who shares ownership in a hospital may have a financial incentive to refer patients for services if he or she receives a percentage of the revenue generated. Laws including the Federal Stark Law and Anti-Kickback Statute were promulgated to combat unnecessary referrals. A 2003 study by the Department of Health and Human Services concluded that physician-investor referrals to hospitals in which they have an investment interest are similar to those physicians without investment interests. Nevertheless, the fear of overutilization and unnecessary self referral remains at the forefront of the regulators’ minds at both the State and Federal level.

States like Florida have in place kickback prohibitions for any physician referring a patient to the hospital for financial gain. The law may allow for certain referrals provided that the physician has a valid reason for the referral. The best way for a facility to protect itself from a rogue physician or in the event of scrutiny is to have well-documented and enforced policies and processes and a compliance plan of ensuring patients are receiving only care they need. Insurance companies will request and review the hospital’s processes to document adequately in the patient record the reason and need for the hospitalization in determining whether to pay for out of network care. Regulators may want to review these processes, as well.

Medicare Considerations

If a physician has not “opted-out” of Medicare, then the physician is required to submit a charge to Medicare for reimbursement for each Medicare item or service received by a Medicare beneficiary. Submitting charges to Medicare means that the physician is required to abide by the Federal Stark Law and Anti-Kickback Statute. The Stark law has a “whole hospital” exception that may physician-owned specialty hospitals fall into, but this exception has requirements that must be adhered to. Policies to ensure that physicians are either “opted-out” or abiding by applicable laws are paramount to ensure that physicians are aware of their risks and do not put the facility into a precarious situation.

Emergency Care

In addition to overutilization, regulators have long scrutinized the emergency care provided by physician owned specialty hospitals. In particular,

  • Failure to have 24 hour nursing care and physician coverage;
  • Reliance on 9-1-1 for emergency response; and
  • Absence of policies/procedures addressing medical emergencies

have remained at the forefront of regulators’ investigations. These issues are generally addressed in Medicare’s conditions of participation for any facility that participates in Medicare; but out of network facilities are best served to heed these guidelines as best practices in patient care.

Planning for an audit or investigation is the best way to ensure that your physician owned specialty hospital remains in compliance with all applicable laws and rules. Putting in place policies and processes to ensure that compliance is at the forefront of your owners minds is your first line of defense against any investigation.