Medicare and Medicaid Programs; Physicians' Referrals to Health Care Entities With Which They Have Financial Relationships

This final rule with 90-day comment period (Phase I of this rulemaking) incorporates into regulations the provisions in paragraphs (a), (b), and (h) of section 1877 of the Social Security Act (the Act). Under section 1877, if a physician or a member of a physician's immediate family has a financial relationship with a health care entity, the physician may not make referrals to that entity for the furnishing of designated health services (DHS) under the Medicare program, unless an exception applies. The following services are DHS: clinical laboratory services; physical therapy services; occupational therapy services; radiology services, including magnetic resonance imaging, computerized axial tomography scans, and ultrasound services; radiation therapy services and supplies; durable medical equipment and supplies; parenteral and enteral nutrients, equipment, and supplies; prosthetics, orthotics, and prosthetic devices and supplies; home health services; outpatient prescription drugs; and inpatient and outpatient hospital services. In addition, section 1877 of the Act provides that an entity may not present or cause to be presented a Medicare claim or bill to any individual, third party payer, or other entity for DHS furnished under a prohibited referral, nor may we make payment for a designated health service furnished under a prohibited referral. Paragraph (a) of section 1877 of the Act includes the general prohibition. Paragraph (b) of the Act includes exceptions that pertain to both ownership and compensation relationships, including an in- office ancillary services exception. Paragraph (h) includes definitions that are used throughout section 1877 of the Act, including the group practice definition and the definitions for each of the DHS. We intend to publish a second final rule with comment period (Phase II of this rulemaking) shortly addressing, to the extent necessary, the remaining sections of the Act. Phase II of this rulemaking will address comments concern