A SELECTICA GUIDE ALL THINGS STARK LAW WHAT IS STARK LAW, AND HOW CAN CONTRACT MANAGEMENT SOFTWARE HELP YOU COMPLY?

Transcription

1 A SELECTICA GUIDE ALL THINGS STARK LAW WHAT IS STARK LAW, AND HOW CAN CONTRACT MANAGEMENT SOFTWARE HELP YOU COMPLY? 1

2 A Selectica Guide All things Stark: What is Stark Law, and how can contract management software help you comply? Hospitals rely on physicians to provide a full range of health care to hospital patients. Physicians, in turn, utilize hospital facilities and support staff in order to provide acute care to their patients. Hospitals and physicians use a variety of arrangements to further these mutual interests. Certain arrangements and agreements are subject to detailed regulation under what s known as Stark Law. Selectica Inc. - Revised March 13,

3 Stark Law in a nutshell The Stark Law, named after U.S. Congressman Pete Stark who sponsored the initial bill, basically prohibits self-referral by physicians for specific designated health services (DHS) deemed by the Centers for Medicare and Medicaid Services (CMS) as high-risk for abuse. The term self-referral means a physician referral to any DHS in which the physician (or immediate family member) has a financial interest. Under the Stark Law, such arrangements are prohibited unless an exception applies. With legislation such as Stark, hospitals are finding that now, more than ever before, they must maintain thorough control over their physician agreements. This is not only a sound business practice in today s regulatory and business environment it is a strategic imperative. Businesses suffer when they violate Stark Law Physician compensation models are predicated on a salary plus performance initiative, which is largely determined by compensation surveys and benchmarking data provided by such organizations as the American Medical Association, Medical Management Group Association, and the American Medical Group Association. However, due to manual processes and antiquated, disjointed systems, many healthcare systems do not have the ability to link physician compensation formulations as outlined in employment contracts to the third-party insurance, payroll, and financial systems. Without visibility into the contract and all of its supporting components, they are unable to verify physician billing and coding, and routinely over-bill Medicare and Medicaid. If a hospital-physician arrangement does not comply with Stark Law, Medicare will not pay the hospital for services provided by or referred by the physician during the period of the violation. DHS at risk for self-referral abuse: Clinical laboratory services Radiology and certain other imaging services Radiation therapy services and supplies Durable medical equipment and supplies Orthotics, prosthetics, and prosthetic devices Parenteral and enteral nutrients, equipment and supplies Physical therapy, occupational therapy, and speech-language pathology services Outpatient prescription drugs Home health services and supplies Inpatient hospital services Outpatient hospital services For hospital executives, physicians, and administrators,the consequences of violating Stark Law can be crippling. A hospital found to be non-compliant can face such repercussions as: Exclusion from participation in Medicare/Medicaid Penalties that run as high as $100,000 per claim False Claims Act fines of thousands of dollars per claim Millions of dollars spent on litigation Forfeiture of revenue from referrals that violate Stark 3

4 Contract lifecycle management software keeps hospitals in compliance Surprisingly, despite the severe consequences of poor reconciliation against contract terms, many hospitals and healthcare systems continue to manage their physician agreements with spreadsheets, hard copy files, multiple systems, or (often insufficient!) combinations of all of the above. These methods don t provide the visibility or control necessary to ensure compliance throughout the life of a contract. Healthcare organizations that face contract management challenges like Stark compliance every day are rethinking what it takes to effectively manage their contracts and associated documents. Automated contract management for these organizations has become a need-to-have, not just an item on their wish list. Why is automated contract lifecycle management such a critical business tool? It aggregates contracts and connects them to associated documents The repository in best-in-class contract management software allows cross-departmental search, sharing, and administration of critical relationship information. Extracted contract data includes the type of agreement, the term, effective and expiration dates, any automatic renewal provisions, compensation, referrals arrangements, fair market value of consideration, and any exemptions and safe harbors. Contract management software also provides integration with external data sources such as spreadsheets, financial systems, and regulatory databases to ensure data fluidity and accuracy across systems. It allows companies to administer contracts effectively In order to meet the strict regulatory environment, hospitals and physicians must diligently administer their contractual arrangements. The expansive prohibitions in the Stark Law affect nearly every arrangement between hospitals and physicians, physician practice groups, clinical laboratories, and independent diagnostic testing facilities. Hospital-physician contracts such as medical directorships, medical office building leases, physician recruitment, and medical staff benefits are all prime candidates for legal liability under the Stark Law. Chief Compliance Officers and administrators are typically responsible for vendor and non-physician contracts, while attorneys oversee the physician contracts. Yet in the present operational and regulatory environment, these responsibilities can overlap or leave gaps. It adapts to the changing regulatory environment Healthcare providers must remain in compliance with Stark Law and reflect any exceptions. Wherever there is a financial relationship between a referrer and a service provider, a carefully crafted Stark Law exception must exist. Congress applies statutory changes to the Stark Act and exceptions when it perceives loopholes or perceived abuses, and it is critical that an organization s contracts incorporate these changes and updates. A contract management system should help identify contracts requiring modification in order to comply with present Stark Law regulations, and ensure they are 4

5 standardized and accessible. Modern contract management systems go beyond the limitations of word processors, providing additional text analysis, simplified updating and reporting, and improved workflow for documents that are critical to keep in step with current regulatory standards and requirements. It prepares hospitals for scheduled or random audits Healthcare organizations understand that CMS can and does perform random audits of hospitals for Stark Law compliance. CMS assumes that hospitals should be collecting information that demonstrates compliance with Stark Law, making the audit a relatively routine task. However, many hospitals maintain physician documents in multiple locations, without scanned and searchable copies of originals, and no facility for online analysis or reporting in accordance with the Disclosure of Financial Relationship Reports. If called upon to provide reports, a hospital needs sufficient systems and processes to meet those requests in a timely manner and avoid penalties during audits. Contract management software makes it easy to generate reports on required information quickly and accurately, demonstrating to auditors that information is being tracked, monitored, and enforced properly. It helps organizations maintain confidentiality When negotiating agreements, legal professionals in healthcare prepare and refer to extensive notes and contract drafts. It is imperative that a contract management system protect the confidentiality of any attorney communications that are privileged by law. While useful in defending a regulatory action, privileged information must be correctly archived and secured to avoid inadvertent disclosure. Procurement and enterprise resource planning solutions are not designed for this purpose, but contract management solutions allow organizations to place specific permissions and role-based access controls on who can and cannot access specific types of information. It allows you to function better crossdepartmentally The repository in best-in-class contract management software allows cross-departmental search, sharing, and administration of critical relationship information. Extracted contract data includes the type of agreement, the term, effective and expiration dates, any automatic renewal provisions, compensation, referrals arrangements, fair market value of consideration, and any exemptions and safe harbors. Contract management software also provides integration with external data sources such as Advantages in using contract management software Streamline internal request, contract creation, and approval processes Provide rapid identification and analysis of key terms and obligations Ensure contracts follow established compliance and approval processes Apply standardized, approved language across all contracts Identify Stark Law issues for further analysis by legal counsel Ensure use of Stark Law exceptions to avoid regulatory penalties Reduce administrative concerns for physician contractors 5

6 spreadsheets, financial systems, and regulatory databases to ensure data fluidity and accuracy across systems. Your essential tool for contract compliance, visibility, and control The rigid requirements imposed by Stark Law pose serious operational challenges to hospitals and physicians. In order to cope with the current and future regulatory environment, healthcare administrators need to be proactive in implementing information systems and processes. For hospitals seeking to successfully navigate the regulatory minefield laid by laws like Stark Law, while also getting an edge in today s competitive business environment, contract management software is an essential tool for contract compliance, visibility, and control organization-wide. If you d like more information on how to start transforming the way your organization manages contracts, visit today. For more information about Selectica CLM software, visit us at selectica.com/cm 6