[Federal Register Volume 62, Number 214 (Wednesday, November 5, 1997)]
[Rules and Regulations]
[Pages 59818-59820]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-29071]


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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]
BILLING CODE 4120-01-M