Quality worries trigger renal physicians' Stark II lawsuit

The AMA and other medical organizations in the past have expressed concern over a safe harbor provision that covers end-stage renal disease facilities.

By Tanya Albert amednews correspondent — Posted Feb. 14, 2005

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Renal physicians say a provision in the Stark II interim final rule that applies to medical directors will make it difficult for dialysis facilities to ensure that end-stage renal disease patients receive quality health care, and they've gone to court to try to change it.

The Stark II law is designed to prevent doctors from improperly self-referring patients. In addition to outlining unacceptable behavior, the law outlines safe harbors that establish guidelines for what would be acceptable practices. For example, a safe harbor can establish what is fair market value for office space or someone's time.

While the Stark II rule was being designed, the government was asked to establish a fair market value benchmark for the compensation of end-stage renal disease facility medical directors. But instead of specifically setting a rate that would apply to them, the government created a safe harbor provision that defined fair market value for hourly payments to physicians for their personal services. Medical director salaries would fall under this provision.

The safe harbor offers two ways to calculate the hourly rates that would be a "fair market value."

One methodology requires that the medical director's hourly payment be less than or equal to the average hourly rate for emergency department physician services in the relevant market. To calculate the rate this way, the market needs to have at least three hospitals that provide emergency services.

The other requires that a facility use four of six approved national salary surveys to calculate an average hourly rate for the specialty.

The government said facilities don't have to use the methodologies it outlined and added that designated health service entities could establish fair market values through other methods. But the government also noted that facilities using one of the two methodologies outlined would "be assured that their compensation rates will be deemed fair market value."

This is where the renal physicians' concern comes in.

Doctors fear that the methodologies will become the norm in the industry. That, they say, results in salaries that underpay those who have the skills required to be a medical director at an end-stage renal disease facility.

In turn, it increases "the difficulty of recruiting the highly skilled individuals with the experience level needed to be effective medical directors of dialysis facilities," said James Weiss, MD, president of the Renal Physicians Assn. "That is why, in the long run, dialysis patient care is at significant risk."

After exhausting other avenues to try to change or delay the provision, the RPA in January sued the Dept. of Health and Human Services and the Centers for Medicare & Medicaid Services in U.S. District Court in Washington, D.C.

The lawsuit accuses the government of not giving the medical community and others adequate time to comment on the provision before it took effect in July 2004. This violated the federal Administrative Procedure Act, the medical group states.

Physicians also say the government didn't use the appropriate survey data to establish the safe harbor.

"The survey data are not applicable," said Dale Singer, RPA's executive director. "For example, there are not enough nephrologists in these samples. Also, the data are old."

Singer added that some of the national salary surveys are difficult to obtain.

In the past, the American Medical Association, American College of Physicians, Council of American Kidney Societies and the Renal Leadership Council told CMS that they were concerned about the provision.

"We share the concerns of the nephrology community and others that the new safe harbors would eventually become the industry standard for fair market value in this context," the AMA wrote in 2004 as part of comments to CMS.

ACP agreed. "CMS is implying that [the safe harbor] is the 'gold standard' that should be applied without mandating that not doing so would be illegal," the group said in its comment letter.

An HHS spokesman said the agency does not comment on pending litigation.

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