It is expected that CMS will soon notify up to 400 hospitals to complete its mandatory Stark contract audit tool, known as the Disclosure of Financial Relationships Report, or the DFRR. The DFRR was originally proposed in 2007 to determine whether hospitals were in compliance with federal physician self-referral law, commonly known as Stark, by seeking information about their physician financial relationships. Presently, CMS is awaiting final OMB approval before circulating the DFRR. The list of targeted hospitals has not been disclosed, but CMS has simultaneously indicated that there is no list, while saying it will go, via email, to many of the same hospitals that received a questionnaire in 2006.
Given the new administration and the stated focus on health reform, the credit crunch, not to mention the significant and substantive objections raised in the comments (including those of the American Hospital Association), it is unclear whether the OMB will further defer the burdensome collection effort, or whether it will allow CMS to proceed. If CMS is allowed to circulate the report to 400 specialty and community hospitals, those hospitals will have 60 days to respond or face civil monetary penalties of up to $10,000 for each day the response is late.
What is the DFRR?
The DFRR is a series of worksheets that targeted hospitals must complete regarding their financial relationships with referring physicians and the physicians' immediate family members. As defined in Stark, financial relationships include both ownership interests and compensation relationships.
What will the DFRR require you to produce?
Other than employment arrangements, a hospital must identify every financial relationship it had with a physician or a member of the physician's immediate family, including direct and indirect investments, physician recruiting and professional services agreements, and medical office building leases during the cost reporting year(s) ending in 2006. Not only must the hospitals complete the worksheets and sign a certification, but the hospital will be required to provide copies of all relevant documents. In particular, the list includes:
- Physician Recruiting Agreements
- Medical Director Agreements
- Medical Office Building Leases
- Professional Services Agreements
- Medical Staff Benefits
- Equipment Leases
- Payments made by physicians for initial capital investment and subsequent capital calls for direct and indirect investments;
How to Prepare?
In light of the fact that CMS can impose civil monetary penalties
of up to $10,000 for each day a hospital is late in responding, all
hospitals would be well-served to begin initial preparations. Even
if a hospital has no physician owners, if it receives a DFRR
request, the response is mandatory. Additionally, hospitals are
required to certify that the report is accurate and complete.
Although it is not clear whether the form will be updated, at last publication, it required a hospital to report all physician financial relationships for the cost report year ending in 2006. At a minimum, a hospital should inventory all the investment relationships and agreements with physicians and their immediate family members that existed between 2005 and 2008.
2. Review the Terms
Do the terms match the payments? For example, the lease states 400 square feet at $15.00 per square foot, but the tenant is really leasing 800 square feet and paying for 400. Were the payments consistent with fair market value studies? Is the rent calculated on a per click basis?
3. Determine if the Arrangement Fits a Stark Exception
While many professional services agreements and recruiting agreements are carefully scrutinized by legal counsel, office and equipment leases are often overlooked. Check for obvious problems in a lease - is it signed by both parties, has it expired and has no holdover provision, is the description of the space different from actual use (suite 2 in lease, but tenant is leasing suite 4), and have the parties properly calculated CPI rent adjustments?
Don't Let the DFRR Catch You Off Guard
For hospitals that are unprepared for the DFRR, a last minute scramble could result in serious exposure. Moreover, if DFRR is not approved by OMB in this round, it is not likely to go away altogether. Investing time and attention to physician contracts and relationships now may well identify problems or processes that can prevent bigger problems down the road.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
