[Congressional Record (Bound Edition), Volume 145 (1999), Part 13]
[Extensions of Remarks]
[Pages 18863-18864]
[From the U.S. Government Publishing Office, www.gpo.gov]



INTRODUCTION OF THE MEDICARE PHYSICIAN SELF-REFERRAL IMPROVEMENT ACT OF 
                                  1999

                                 ______
                                 

                        HON. FORTNEY PETE STARK

                             of california

                    in the house of representatives

                        Thursday, July 29, 1999

  Mr. STARK. Mr. Speaker, the physician self-referral law has 
successfully prevented billions of dollars worth of business deals that 
would have abused patients through overtesting and provision of 
unnecessary services and wasted Medicare funds. That's why the 
legislation that is sponsored by Representative Bill Thomas--which 
effectively guts the statute by eliminating the Federal Government's 
authority to regulate providers' compensation relationships--should be 
summarily rejected.
  Instead, I hope that my colleagues will take a careful look at the 
legislation that I am introducing, which makes certain responsible 
changes in the law to streamline and simplify it.
  The principal provision in the Medicare Physician Self-Referral 
Improvement Act of 1999 creates a fair market value exception, or safe 
harbor, for providers who enter into compensation relationships with 
entities to which they refer Medicare and Medicaid beneficiaries for 
health services. All that is required under the fair-market value 
exception is that providers set down the terms of their arrangement in 
writing, that it is for a specified period of time and is signed by all 
parties; that it is not based on the volume or value of referrals; and 
that rates paid are commercially reasonable.
  What honest doctor can't meet those standards?
  The bill that I am introducing also makes changes in the ``direct 
supervision'' requirement that governs the in-office ancillary services 
safe harbor; substantially narrows financial relationship reporting 
requirements for providers, who would only have to produce accounts of 
their financial relationships and those of immediate family members 
upon audit; modifies the law's ``direct supervision'' requirement for 
in-office ancillary services; expands the prepared plan exception to 
include Medicare and Medicaid coordinated capitated plans; creates an 
exception for areas in which the HHS Secretary finds there are no 
alternative providers; exempts ambulatory surgical centers and 
hospices; alters the definition of a group practice; and requires HCFA 
to issue advisory opinions within 60 days of receiving a request.
  If enacted, these changes would improve the law without undermining 
it--as the Thomas bill clearly would. Policymakers know that

[[Page 18864]]

the self-referral law is uniquely effective in controlling 
overutilization, and that it works well precisely because providers 
scrub their arrangements before finalizing contracts. In effect, the 
self-referral law is self-enforcing.
  To further substantiate that point, at a May 13 Ways & Means Health 
Subcommittee hearing on the physician self-referral law, the HHS 
Inspector General's chief counsel, D. McCarty Thornton, testified that 
the phony joint ventures on the 1980's have decreased significantly. 
That is good news.
  The result is that compliance with the law is standard practice in 
the health industry today. Even Columbia-HCA, which I have long 
criticized, now has a system in place that carefully screens financial 
relationships with physicians in order to stay in compliance with the 
law.
  This demonstrates that even without final regulations, the law is 
effectively controlling overutilization in Medicare's fee-for-service 
program--which still comprises 82 percent of all enrollees. Absent the 
law's curbs, Medicare would be highly vulnerable to overutilization 
again. Indeed, in 1995, when Representative Thomas introduced similar 
legislation, the Congressional Budget Office estimated the bill would 
cost Medicare $400 million over 7 years.
  It is particularly hypocritical that the American Medical Association 
is lobbying for repeal of the law's compensation provisions. Last time 
I checked, AMA's Code of Medical Ethics bars members from entering into 
self-referral arrangements.
  The Health Care Financing Administration has promised to issue final 
regulations for the physician self-referral law by next spring. At this 
juncture, it would be deeply irresponsible to enact legislation that 
effectively repeals the heart of the law--which is the Federal 
Government's ability to require fair-market value parameters for 
compensation arrangements between providers.
  If the law is repealed, taxpayers will again be forced to foot the 
bill for billions of dollars in provision of unnecessary services. 
Enactment of the Thomas proposal would shorten Medicare's life and 
return us to the days of the 1980's, when physicians created sham joint 
ventures to which they steered their patients for unnecessary, 
expensive, and even painful tests.
  I hope that we will not go down that road.

          The Medicare Physician Self-Referral Improvement Act


                              bill summary

       The Medicare Physician Self-Referral Improvement Act of 
     1999 introduced by Rep. Stark refines the self-referral laws 
     in a number of ways. Below is a summary of the bill that 
     highlights major provisions in current law and major changes 
     that this legislation makes to those provisions.
       Current law bans compensation between doctors and providers 
     in certain designated health services areas. It is designed 
     to provide a ``bright line'' in the law and to avoid 
     requiring the government to investigate difficult 
     ``kickback'' cases. The current law includes many complex 
     exceptions to the total ban.
       The Medicare Physician Self-Referral Improvement Act of 
     1999 would replace most of the compensation exceptions with a 
     single ``Fair Market Value'' test. It would maintain the 
     exceptions to the ban for physician recruitment and de 
     minimis gifts. Under the fair market value test, an agreement 
     must be in writing, for a definite period of time, and not be 
     dependent on the volume or value of referrals. The 
     compensation in the contract must be a reasonable ``fair 
     market'' rate.
       Current law requires ``direct supervision'' by referring 
     physicians of those providing designated health services to 
     qualify for the in-office ancillary service exception.
       The Medicare Physician Self-Referral Improvement Act of 
     1999 would require general supervision which is a less 
     stringent standard than current law, but it would require 
     that generally the physician be on the premises.
       Current law provides a general managed care exemption.
       The Medicare Physician Self-Referral Improvement Act of 
     1999 would clarify that the managed care exemption extends to 
     Medicaid managed care plans and Medicare+Choice 
     organizations.
       Current law provides an exception from the law in instances 
     where no alternative provider is available.
       The Medicare Physician Self-Referral Improvement Act of 
     1999 would change that exception so that the Secretary of 
     Health and Human Services would determine whether an area is 
     underserved and therefore needed such an exception.
       Current law requires reporting of provider financial 
     relationships and those of their immediate families, and 
     institutes civil monetary penalties for failure to comply 
     with such reporting requirements.
       The Medicare Physician Self-Referral Improvement Act of 
     1999 would repeal that reporting requirement and replace it 
     with a requirement that physicians have records available for 
     audit purposes. It would also abolish the civil monetary 
     penalties that go along with the current financial 
     relationship reporting requirement.
       Current law provides a list of designated health services 
     that are covered by the self-referral ban.
       The Medicare Physician Self-Referral Improvement Act of 
     1999 would remove eyeglasses and lenses from the list and 
     would clarify that the law does not cover ambulatory surgical 
     centers or hospices.
       Current law requires HCFA to provide advisory opinions upon 
     request, but has no deadline for their completion.
       The Medicare Physician Self-Referral Improvement Act of 
     1999 would require that advisory opinions be answered by HCFA 
     within 60 days.
       Current law forbids providers from providing DME and 
     parenteral and enteral nutrients as part of the in-office 
     ancillary exception.
       The Medicare Physician Self-Referral Improvement Act of 
     1999 would eliminate the ban.

     

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