On August 19, 2008, the Centers for Medicare and Medicaid Services (“CMS”) published its final rules in the Federal Register regarding the Disclosure of Financial Relationships Report (“DFRR”), that places a mandatory obligation on hospitals to disclose comprehensive information on their financial relationships with physicians under the physician self referral law, 42 U.S.C. § 1395nn (“Stark”). According to CMS, the DFRR will be used to (1) “identify arrangements that potentially may not be in compliance with [Stark] … and (2) to identify practices that may assist us in any future rulemaking concerning the reporting requirements and other physician self-referral provisions.”
The DFRR is currently comprised of a set of eight detailed worksheets [1]. Click here to view the worksheets, which require hospitals to report all ownership, investment, and compensation arrangements with physicians (and their immediate family members). Hospitals will be required to disclose detailed information regarding: (1) ownership of the hospital by a physician investor; (2) payments made to the hospital by physician owners, including initial investments capital calls and loan guarantees; (3) an investment reconciliation for each physician owner; and (4) compensation arrangements with physicians including space, equipment, personal service and recruitment arrangements. Further, hospitals must disclose isolated transactions, remuneration to physicians unrelated to designated health services, payments made by physicians to the hospital, charitable donations received from physicians, non-monetary compensation or medical staff incidental benefits granted to a physician and loans or loan guarantees. Moreover, detailed supporting documentation must also be submitted with the DFRR. For instance, hospitals will be asked to furnish their audited financial statements and all written agreements in effect in 2006 for each category of compensation arrangement. The hospital CFO, CEO or other appropriate hospital official must sign a certification statement verifying the completeness and accuracy of the information reported in the DFRR.
The DFRR will be used as a pilot program for CMS to assist in proposing a potentially regular [2]financial disclosure process for all Medicare participating hospitals. Accordingly, the DFRR will initially be sent to 500 [3] hospitals (both general acute care and specialty hospitals). Pursuant to the Deficit Reduction Act of 2006 (DRA), CMS distributed a voluntary survey to specialty and general hospitals (the “DRA Survey”). Because CMS was unable to determine whether those hospitals that did not respond to the voluntary DRA Survey questions on financial relationships had “tainted relationships” or failed to respond for other reasons, the 290 hospitals that did not respond to the voluntary DRA Survey will be among the 500 hospitals to receive the DFRR. CMS will select an additional 210 hospitals to complete the DFRR, but it is unclear how these additional hospitals will be selected. The 500 selected hospitals will have 60 days to complete and submit the DFRR. CMS has indicated that failure to submit a completed DFRR within the 60-day window may result in civil penalties up to $10,000 each day beyond the deadline. [4]
In conclusion, the timeframe and production requirements will pose a substantial administrative burden on most hospitals. Accordingly, hospitals should begin to prepare, collect and organize their files and carefully review their financial relationships with physicians (and their immediate family members) to ensure compliance with the Stark law. Even if your hospital is not one of those selected to submit the DFRR, there is no guarantee that there will not be another round of requests. Nevertheless, it would be prudent to have this type of information organized and kept in a central location so that one is prepared for the DFRR and/or any request from any agency for this type of information.
[1] Please note that these are the proposed worksheets and they have not been finalized yet. CMS has stated, however, that they are "collecting the correct type and appropriate amount of information, and thus, are finalizing the DFRR, as proposed, with minor modifications."
[2] CMS has stated that they "are not adopting a regular reporting or disclosure process at this time, and thus, the DFRR will be used, at this time, as a one-time collection effort. (Depending on the information we receive on the DFRR and other factors, we may propose future rulemaking to use the DFRR or some other instrument as a periodic or regular collection instrument.)"
[3] CMS has stated that they "are proceeding with the proposal to send the DFRR to 500 hospitals. However, based on further review and comments we may receive in response to the revised Paper Reduction Act ("PRA") package that will be published separately in the Federal Register, we may decide to decrease (but not increase) the number of hospitals that CMS would send the DFRR."
[4] "Prior to imposing a civil monetary penalty in any amount, CMS would issue a letter to any hospital that does not return the completed DFRR, inquiring as to why the hospital did not return timely the completed DFRR. In addition, a hospital may, upon a demonstration of good cause, receive an extension of time to submit the requested information. Although CMS did not make a specific proposal concerning the imposition of civil money penalties, CMS is informing the public in this final rule that, before imposing any civil money penalties, CMS will follow the procedures described above."
Questions or Assistance? If you have questions about this alert, please contact Joan Feldman or a member of our Health Care Practice.