Miller Healthcare Law on Stark Law Update, Recent Managed Care Developments, Restrictive Covenants, HIPAA and Arbitration

Public Comment Period Extended. Because of the significant number of comments received, the original 90-day public comment period on the Phase I “final” Stark rules was extended 60 days until June 4, 2001.

Shared Facilities Ok’d. The Phase I final rules make it possible under certain circumstances for physicians who are not in the same medical group to share facilities, such as a lab or x-ray, if the physicians practice in the “same building.” This may offer physicians a way to reduce their expenses for these ancillary services while capturing an additional, much needed revenue source. However, Medicare and Stark physician supervision rules for these ancillary services may make it difficult to share x-ray or other imaging unless the physicians practice in the same office suite.

Stark Explained. Jeremy Miller has made or will make presentations explaining the final Stark rules to the Los Angeles, Orange County and Northern California chapters of the Medical Group Management Association and to the California Society for Healthcare Attorneys. Jeremy has also been interviewed by and quoted in the American Medical News and the Physician Practice Compliance Alert on the final Stark rules. Please contact us if you would like a free copy of Jeremy’s
speech materials.

Stark Compliance Is Not Enough. When considering any referral relationship it is important to remember that the Stark law is only one of a number of federal and state anti-kickback and patient referral laws that must be complied with.

Recent Managed Care Developments
Reporting Under Provider Solvency Regulations Has Begun. On March 22, 2001, the California Department of Managed Health Care’s emergency regulations became effective. These regulations, among other things, require quarterly reporting by “ risk-bearing provider organizations” (“RBPOs”) of financial statements, verification of IBNRs, and maintenance of positive Tangible Net Equity and positive working capital. The regulations are intended to ensure that RBPOs have the ability to meet the contractual obligations they have undertaken. RBPOs include independent practice associations (“IPAs”) and medical groups which have capitated contracts with health plans. RBPOs maintaining their financial records on a calender year basis were required to make their initial quarterly submission for 2001 by May 15, 2001. The reporting forms and additional information are available on the DMHC’s website (

HMOs Can Be Sued Under State Law. In a May 3, 2001 decision, McCall v. PacifiCare of California, the California Supreme Court ruled that the Medicare Act does not prevent Medicare beneficiaries from suing their HMO (or physician) under state law for alleged denial of treatment. The patient who suffered from progressive lung disease alleged that PacifiCare and his physician refused to refer him to a specialist for a lung transplant and ultimately forced him to disenroll from PacifiCare in order to get on the Medicare list for a transplant. During the wait his condition worsened.

Watch Out for Contractual Statutes of Limitation. Physicians who have financial disputes with IPAs or other managed care organizations (“MCOs”) should be careful to read the fine print in their contracts with these organizations. The contract may contain a “contractual statute of limitation.” In the absence of such a provision, a provider normally would have several years in which to make an arbitration demand or file a lawsuit to collect unpaid fees. However, these provisions can shorten the time in which a lawsuit needs to be filed to as little as six months or less. Therefore, if you are currently having a dispute with an MCO, you need to carefully review your contract to make sure that you are giving written notice of your complaint on a timely basis.

Avoid Being Stiffed. On June 4, 2001, Jeremy Miller made a presentation to the Radiology Business Management Association’s annual meeting in Scottsdale, Arizona on “Protecting Yourself from HMOs and IPAs Who Don’t Pay.” Please contact us for a free copy of Jeremy’s speech materials.

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