Stark Phase III
Final Rule of Stark Law Spares Physician Ownership
The biggest news to come from the third and final phase of the Stark Law's implementation is what CMS chose not to say, according to healthcare industry observers from the law firm Waller Lansden Dortch & Davis. They say the rule omits revisions recently proposed in the Medicare 2008 Physician Fee Schedule that would make many current "under arrangements," "per click" and percentage compensation contracts illegal.

"The Phase III regs don't give physician-owners anything to lose sleep over," says lawyer Michelle Marsh, a partner at Waller Lansden, "but they can't rest entirely easy because there's a perceived conflict between what they say in the Phase III rules and what CMS's actual position is."

Providers should expect to see the real fireworks when CMS further addresses these areas, says Ms. Marsh. CMS says Phase III does not establish new exceptions to current self-referral prohibitions but could result in the restructuring of established arrangements.

The Phase III rule eases restrictions on hospitals' abilities to recruit and retain physicians. It also allows for the correction of hospitals' non-monetary compensations that inadvertently exceed a physician's personal services arrangement if the overpayment does not exceed 50 percent of the permitted amount or if the physician repays the amount within 180 days of the excess payment's receipt.

"On the negative side, any provider that has relied heavily on the Stark indirect compensation exception needs to review this relationship in light of the new rule that will ?collapse' many former indirect relationships into direct relationships," says Ms. Marsh, adding that "providers should be cautious when contemplating relationships that appear to comply with Phase III regulations but may not meet the standards of proposed Stark changes included in the Physician Fee Schedule."

- Dan O'Connor

Reimbursement
Medicare Updates Conditions of Participation for ASCs
Key additions to a proposed rule from CMS amending Medicare's conditions for coverage for ambulatory surgical centers include:

• a revamped quality assessment and performance improvement condition for more proactive quality assurance and a requirement that ASCs' governing bodies take responsibility for this program;
• a disaster preparedness standard requiring ASCs to institute emergency response plans, and to build their interaction with local and state emergency officials;
• requirements that bring ASC-provided radiologic services up to the standards required of laboratory services;
• a new patients' rights condition, covering such issues as physicians' financial interests and disclosure, advance medical directives and information confidentiality;
• an expansion of the infection control requirement as a condition; and
• a patient assessment requirement that aims to ensure the safety and suitability of surgical procedures.

For Craig Jeffries, executive director of AAASC, the proposed changes may be evidence in ASCs' favor. "Establishing these new requirements in regulatory rules," he says in a statement, "should eliminate many of the regulatory oversight concerns raised by those who opposed further expansion of the list of procedures that Medicare allows to be performed in an ASC."

Public comment will be accepted until Oct. 30 and the agency expects to issue a final rule later in the year.

- David Bernard

Eye Services Fare Well
New ASC Payment System Kind to Ophthalmology
Of the 15 highest ASC procedures by volume, cataract facility fees (CPT 66984) will see the highest increase in payment under the new ambulatory surgery center payment system. Even in 2008, the first year of the new payment system's four-year phase-in, the cataract facility fee will increase by $8, from $973 to $981. "And with inflation updates commencing in 2010, rates will enjoy steady growth in the years ahead," says Michael A. Romansky, JD, Washington counsel to the Outpatient Ophthalmic Surgery Society.

The original proposed ASC rule would have cut the facility payment for cataract. But in this final rule, an increase in the payment level to 67 percent (from the initial proposal of 62 percent) of the 2008 hospital outpatient department rate results in an increase in payment over 2007 ASC rates for most ophthalmic services. Major retina and glaucoma ASC facility fees will see increases of 106 percent and 45 percent to 108 percent, respectively, after the new rates are fully phased in by 2011.

Of the 790 surgical procedures that will be eligible for ASC facility payments beginning next year, more than 60 are ophthalmic. However, for procedures performed more than 50 percent of the time in a physician's office - such as 65855 (trabeculoplasty), 67228 (laser photocoagulation) and 67915 (repair eyelid defect) - payment will be limited to the lesser of the ASC rate or the typically lower Medicare Fee Schedule non-facility practice expense amount.

CMS will phase the new system in over four years. In 2008, the ASC payment rate will be a blended amount equal to 75 percent of the applicable calendar year 2007 payment rate and 25 percent of the applicable calendar year 2008 payment rate. By 2011, the new ASC payment system will be fully implemented. "This has the effect of slowing down the rate of increases in payments for some services - cataract and vitreoretinal, for example - but also the decreases in other services, such as the reduction in YAG payments [$312 to $216 in 2011] is feathered in over four rather than two years," says Mr. Romansky.

- Dan O'Connor

White Noise
Taking the Edge Off the Sounds of Healthcare
Staffers who spend day after day in a facility may eventually become so accustomed to the noise that they barely notice the beeping equipment or loud conversations. But these are all new to patients, and they may find it hard to relax in the midst of such a cacophony.

In addition to the echoing activity of a hospital, there's a distinct sound in the Lenfest Pavilion, part of the Abington Memorial Hospital in Abington, Pa. Careful listeners can hear an airy whoosh coming from speakers that are embedded into the ceiling tiles and practically invisible.

"I find noise in hospitals to be unrelenting and unfortunate," says facilities director Judith Kratka. "I thought there must be some tech that can help us overcome it. So I asked my vendors, and they led me to a project that uses white noise to create a more serene environment for patients."

The sound itself, which Ms. Kratka describes as similar to a soft air conditioner, is practically imperceptible. "You can hear the sound if you listen carefully, but it's such a background noise that it's not obvious," she says.

- Nathan Hall

In the Know
FDA's Coming Data Crackdown? To demonstrate FDA compliance, a surgical scrub or rub manufacturer must show that the product produces an immediate 1-log reduction in bacterial cell count from the pre-scrub/rub count (baseline) on day one, a 2-log reduction on day two and a 3-log reduction on day five. Each "log reduction" is an exponent of 10, so a 1-log reduction is a 10-fold decrease, a 2-log reduction is equivalent to a 100-fold decrease and so on. A reduction in bacterial load from 100,000 to 1,000 copies/ml, for example, is a 2-log, or 99 percent, reduction. As things now stand, FDA asks that producers use a simple mathematical mean to calculate log reductions. Many have criticized this method, saying it lets manufacturers give too much weight to just a few subjects who show large log reductions. As a result, the agency may soon require producers to provide "confidence intervals" (CIs) along with their log reductions. A CI is a range of numbers that measures the uncertainty of the result. A large log reduction with a narrow CI should give users even more confidence that product will perform as promised.

FDA Approves Human Thrombin for Topical Use in Surgery. Evithrom (human thrombin), a blood-clotting protein used to help control bleeding during surgery, is the first human thrombin approved since 1954 and is the only product currently licensed. It is derived from human plasma obtained from U.S. donors and is indicated as an aid to stop oozing and minor bleeding from capillaries and small veins or when control of bleeding by standard surgical techniques is ineffective or impractical. The product is applied to the surface of bleeding tissue and may be used by clinicians in conjunction with an absorbable gelatin sponge.

By 2008, Medicare Won't Pay for Hospital Errors. Right now, Medicare pays for more than 60 percent of hospital-acquired infections, but this is no longer acceptable, agency leaders have said. The new rules state the agency will stop paying for preventable complications, leaving hospitals left holding the bag for these fees. CMS has banned payment for some HAIs, second surgeries to retrieve objects left behind or patients injured by falls occuring in hospitals.