Confusion in Health Laws Confound Providers' Quest to Comply

Healthcare Financial Management, Dec, 1999 by Robbi-Lynn Watnik

Health care is among the most regulated sectors of the U.S. economy, with a multitude of Federal and state laws and regulations that must be followed. In some instances, these rules conflict with each other, making it difficult or impossible for a provider to be compliant because following one rule may require the provider to violate another. In addition, some rules are confusing and can be interpreted in different ways. In such instances, providers may be at risk of being found to be in noncompliance if their interpretation differs from that of a regulator. Government agencies have yet to resolve many of the conflicts between rules or clarify confusing ones. Providers therefore should be aware of these problems and be prepared to defend actions taken in an effort to comply with any given rule.

Conflicts

Three instances of conflicting Federal healthcare rules demonstrate the types of compliance challenges providers face:

* Medicare's three-day payment window vs. skilled nursing facility (SNF) consolidated billing;

* Gainsharing vs. physician incentive plans; and

* Civil monetary penalty statute vs. antikickback statute.

Medicare's three-day payment window vs. SNF consolidated billing. Medicare's three-day payment window rule requires a hospital paid under the prospective payment system to bundle all outpatient diagnostic and certain outpatient nondiagnostic services furnished to a Medicare beneficiary into the inpatient admission if the services were performed three days before the admission and were furnished by an entity wholly owned or operated by the admitting hospital. Although hospitals may be uncertain about which types of nondiagnostic services must be bundled and when an outpatient facility is considered to be "wholly owned or operated" by the hospital, the overriding concept is clear: if an outpatient service is furnished three days before the inpatient PPS admission, bundling may be necessary.

The general rules for SNF consolidated billing are equally clear. Under consolidated billing, the SNF payment for each Medicare beneficiary is intended to cover all services within the general scope of care for a SNF resident regardless of where the service is performed. If the SNF resident receives a service that falls within the general scope of SNF care at a hospital outpatient facility and returns to the SNF by midnight, the hospital must bill the SNF for the payment.

The conflict arises when a SNF resident receives an outpatient service, returns to the SNF by midnight, and then is admitted to the hospital within three days of the outpatient service. If the outpatient service was a diagnostic service (or nondiagnostic service in connection with the subsequent admission) and is not on the SNF consolidated-billing exclusion list, the hospital will not know whether to bill the SNF for the service or bundle the service into the inpatient admission. If the hospital bills the SNF for the service, as required by consolidated billing, the hospital could face allegations of violating the False Claims Act due to noncompliance with the three-day window rule. If the hospital bundles the service, the SNF could be accused of duplicate billing; hence the conflict.

Currently, there does not appear to be a clear answer to this conflict. The best course of action is to contact the local fiscal intermediary to discuss the specific circumstances.

Gainsharing vs. physician incentive plans. In July, the HHS Office of Inspector General (OIG) released a special advisory bulletin warning hospitals and physicians against gainsharing arrangements. [a] Gainsharing occurs when a hospital offers physicians a percentage of any savings it derives from the physicians' efforts to reduce clinical costs. The OIG acknowledged that "some arrangements may offer significant benefits where there is no adverse impact on the quality of care." Nevertheless, the OIG stated that the law did not grant the agency any discretionary authority to distinguish acceptable from unacceptable arrangements and that a "legislative fix" to this situation was not imminent.

The OIG's position conflicts with the IRS's previous interpretation of laws governing economic incentives. In an unpublished private letter ruling issued in July 1998, the IRS stated that a hospital's proposed gainsharing arrangement would not jeopardize its tax-exempt status. The IRS interpreted the proposed arrangement as a quest to "create incentives for physicians to assist the hospital in the development and implementation of more efficient practice patterns." The IRS stipulated that its ruling "assumes that such benefits constitute a lawful activity." Implicit in the IRS's ruling was that, in at least some instances, gainsharing arrangements were legal. Thus, the IRS's ruling gave hospitals a degree of comfort with establishing gainsharing arrangements that was nullified by the OIG's bulletin. It should be noted that the OIG sought to mitigate the conflict by stating that it would not take legal action against organizations that withdrew from such arrangements immediately.