I. Background

A. Problems Associated with Physician Self-referrals

B. Legislation Designed to Address Self-referrals and Similar Practices

1. Legislative history of section 1877

2. Recent provisions and how they relate to each other

C. HCFA and OIG Regulations Relating to Section 1877

II. Sections 1877 and 1903(s) of the Act and the Provisions of This Proposed Rule

A. Reflecting the Statutory Changes in Section 1877

1. General prohibition

2. Definitions

a. Referral, referring physician

b. Designated health services

c. Financial relationship

d. Compensation arrangement, remuneration

3. General Exceptions to the Prohibition on Physician Referrals

a. Exception-physician services

b. Exception-in-office ancillary services

c. Exception-certain prepaid health plans

d. Other exceptions

4. Exceptions That Apply Only to Certain Ownership or Investment Interests

a. Exception-certain investment securities and shares

b. Exception-ownership or investment interest in certain health care facilities

5. Exceptions That Apply Only to Certain Compensation Arrangements

a. Exception-rental of office space

b. Exception-rental of equipment

c. Exception-bona fide employment relationship

d. Exception-personal service arrangements

e. Exception-remuneration unrelated to the provision of designated health services

f. Exception-physician recruitment

g. Exception-isolated transaction

h. Exception-certain group practice arrangements with a hospital

i. Exception-payments by a physician for items and services

6. Requirements Related to the "Substantially All" Test

7. Reporting Requirements

8. Sanctions

9. Additional Definitions

a. "Clinical laboratory services"

b. "Entity"

c. "Hospital"

d. "HPSA"

e. "Immediate family member" or "member of a physician's immediate family"

f. "Laboratory"

g. "Plan of care"

10. Conforming Changes

11. Editorial Changes

B. Applying The Referral Prohibition to the Medicaid Program: Section 1903(s) of the Act and the Provisions of this Proposed Rule

III. Interpretations of Sections 1877 and 1903(s) of the Act

A. Definitions

1. Designated health services

a. Clinical laboratory services

b. Physical therapy services (including speech-language pathology services)

c. Occupational therapy services

d. Radiology services, including magnetic resonance imaging, computerized axial tomography scans, ultrasound services, and radiation therapy services and supplies

e. Durable medical equipment and supplies

f. Parenteral and enteral nutrients, equipment, and supplies

g. Prosthetics, orthotics, and prosthetic devices

h. Home health services

i. Outpatient prescription drugs

j. Inpatient hospital services

k. Outpatient hospital services

2. Direct supervision

3. Entity

4. Fair market value

5. Financial relationship

6. Group practice

7. Referral

8. Remuneration

B. General Prohibition on Referrals

C. General Exceptions That Apply to Ownership or Investment Interests and to Compensation Arrangements

1. Exception for physician services

2. Exception for in-office ancillary services

a. The site requirement

b. The billing requirement

c. Designated health services that do not trigger the in-office exception

3. Exception for services provided under prepaid health plans

a. Physicians, suppliers, and providers that contract with prepaid organizations

b. Managed care organizations under the Medicaid program

c. Evolving structures of integrated delivery and other health care delivery systems

d. Designated health services furnished under a demonstration project or waiver

D. Exceptions That Apply Only to Ownership or Investment Interests

1. Exception for ownership in publicly traded securities

2. Exception for hospital ownership

E. Exceptions That Apply Only to Compensation Arrangements

1. A new exception for all compensation arrangements that meet certain standards

2. A new exception for certain forms of "de minimis" compensation

3. The "volume or value of referrals" standard

4. The commercial reasonableness standard

5. The Secretary's authority to create additional requirements

6. Exception for bona fide employment relationships

7. Exception for personal services arrangements

8. Exception for remuneration unrelated to the provision of designated health services

9. Exception for a hospital's payments for physician recruitment

10. Exception for certain group practice arrangements with a hospital

11. Exception for payments by a physician for items and services

F. The Reporting Requirements

1. Which financial relationships must be reported

2. What entities outside the United States must report

G. How the Referral Prohibition Applies to the Medicaid Program

1. Who qualifies as a "physician" for purposes of section 1903(s)

2. How the referral prohibition and sanctions affect Medicaid providers

3. How the referral rules apply when Medicaid-covered designated health services differ from the services covered under Medicare

4. How the reporting requirements apply under the Medicaid program

IV. Our Responses to Questions About the Law

A. Definitions

1. Compensation arrangement

What is an "indirect" compensation arrangement?

Which exceptions apply in indirect situations?

2. Entity

What are the characteristics of an "entity" that provides for the furnishing of designated health services?

When is an entity furnishing, or providing for the furnishing of, designated health services?

3. Financial relationship

How do equity and debt qualify as ownership?

Is membership in a nonprofit corporation an ownership or investment interest?

Do stock options and nonvested interests constitute ownership?

4. Group practice

What is the "full range of services" test?

5. Immediate family member or member of a physician's immediate family

How does the prohibition affect a physician's referrals to immediate family members?

If one member of a group practice cannot make a referral to an entity, are all other group practice physicians also precluded?

6. Remuneration

Do payments qualify as remuneration only if they result in a net benefit?

B. General prohibition-What constitutes a prohibited referral

Does the prohibition apply only if a physician refers directly to a particular related entity?

When is the owner of a designated health services provider considered as equivalent to that provider?

Has a physician made a referral to a particular entity if another individual directs the patient there?

How will HCFA interpret situations in which it is not clear whether a physician has referred to a particular entity?

C. General Exceptions That Apply to Ownership or Investment Interests and to Compensation Arrangements

1. The in-office ancillary exception

Can a physician supply crutches as in-office ancillary services?

2. Exception for services furnished by organizations operating under prepaid plans.

Can a physician refer non-enrollees to a related prepaid organization or to its physicians and providers?

3. Other permissible exceptions for financial relationships that do not pose a risk of program or patient abuse.

Should situations that meet a safe harbor under the anti-kickback statute be automatically excepted?

D. Exceptions That Apply Only to Ownership or Investment Interests

1. Exception for ownership in publicly traded securities or mutual funds

Does the exception for publicly traded securities apply to stock options?

2. Exception for services provided by a hospital in which a physician or family member has an interest

Can a physician or family member own an interest in a chain of hospitals?

E. Exceptions That Apply Only to Compensation Arrangements

1. Compensation arrangements in general

Can a lease or arrangement for items or services have a termination clause?

Will a physician's referrals be prohibited if an entity pays for certain incidental benefits?

2. Exception for agreements involving the rental of office space or equipment

Can a lessee sublet office space or equipment?

Does the lease exception apply to any kind of lease covering space or equipment?

Can a lease provide for payment based on how often the equipment is used?

3. Exception for personal services arrangements

How does the physician incentive plan exception apply when an enrolling entity contracts with a group practice?

V. Regulatory Impact Statement

A. Background

B. Anticipated Effects and Alternatives Considered

1. Physicians

2. Entities, including hospitals

C. Conclusion

VI. Collection of Information Requirements

VII. Response to Comments