Most optometrists should be able to practice unhindered under Stark II

Issue: January 1999

ST. LOUIS — Few optometrists would have to change their practices under the proposed Medicare and Medicaid reforms contained in the so-called Stark II legislation, said David Mills, OD, chairman of the American Optometric Association (AOA) Federal Relations Committee in an interview with Primary Care Optometry News.

"The majority of optometric practices are set up so that the doctors are not referring to outside entities where they have an interest," he said. "They are basically referring to themselves — their own dispensaries within their own practices." The AOA did not offer comments to the Health Care Financing Administration (HCFA) regarding the self-referral prohibitions.

Comments on the proposed Stark II regulations were due in May 1998. The final version of the regulations probably will be available later this year, Dr. Mills said. If the Stark II regulations are included in the final Medicare reform legislation, it could be 3 years before they take effect.

Stark II prohibits a physician from prescribing, ordering or arranging for certain "designated health services" when those services are provided by an entity in which the physician has a financial relationship and are reimbursed by Medicare or Medicaid. The financial relationships to which the law refers include both ownership interests and compensation arrangements.

Exceptions for in-office services

The self-referral prohibition defined in the original Stark law is rather broad, and the legislation contains a series of exceptions for in-office ancillary services, bona fide employees, personal service agreements, equipment or space leases and a number of other relationships that meet specified requirements. The exception for "in-office ancillary services" requires that these services be personally performed by the referring physician, by a physician who is a shareholder or employee of the referring physician’s group practice or by individuals who are directly supervised by the referring physician or a member of the same group practice. HCFA’s definition of a group practice requires that the practice be owned by two or more shareholders. Offices owned by a single practitioner who employs other doctors are precluded.

When ODs work for MDs

These definitions could pose problems for practices where an optometrist works in an office owned by an ophthalmologist, according to Scott A. Edmonds, OD, a practice management consultant. If, for example, the optometrist referred cataract patients to the ophthalmologist and the ophthalmologist sent them back to the OD for glasses, both referrals could violate Stark II regulations, he said.

"Some optometrists have sold their practices to ophthalmologists, and it looks like they still maintain a separate operation, but technically the ophthalmologist owns the optometrist’s practice and the OD is an employee. In this case, the ophthalmologist and the optometrist should form a corporation where they are partners," he said.

If HCFA adheres to its strict definition of direct supervision, an employed OD who runs the optometric practice while the ophthalmologist is in surgery could be in violation of Stark II, Dr. Edmonds said.

Review relationships

Optometrists in nontraditional practice settings would be well advised to closely examine the Stark II regulations and how they may apply to their own practices, Dr. Edmonds said.

"Any optometrist who’s involved with a PPMC (physician practice management company), a laser company, an ophthalmologist, a commercial entity or an optician needs to take a close look at how those agreements that define the relationship are written," he said. "Their lawyers should look at it in light of these new Stark II regulations. Those are the types of situations where people are going to get into trouble. If you’re in any kind of creative relationship, you’d better go back and look at it again."

Another possible scenario that could cause problems would be a group of optometrists who do not have their own dispensaries and share an eyeglass center at another location, Dr. Mills said.

The proposed Stark regulations typically will not affect side-by-side corporate optometric settings, Dr. Mills said. For the most part, the optometrist has no financial interest in the optical shop, so referring out of convenience would not violate the Stark law, he said.

While doctors in nontraditional practices may want to make sure their business relationships will not violate the Stark regulations, it is likely that few ODs will be affected, Dr. Mills said. "There’s no harm in making sure you’re not violating anything. I just don’t see it being a big issue for optometrists," he said.

Attendance requirement

Further complicating the "in-office ancillary services" exception is HCFA’s requirement that members of a group practice provide 75% of their "patient care services" through the group to qualify for the exception. Practices "should be able to maintain records in the form of general schedules that are sufficient to demonstrate its calculation in the event of an audit."

While this will be a time-consuming step, it should not pose a problem for most group practices, said Michael Larkin, OD, assistant professor at Southern California College of Optometry.

"Practices usually maintain schedules for each doctor," he said. "Keeping track of that could easily be done through the scheduling secretary. There will be a little more hardship, as there always is with the government and documenting everything, but I don’t find that onerous at all," he said.

Discounts and rebates

The proposed regulations permit physicians to receive discounts based on volume, as long as this discount is passed on to the patient, his or her insurer or — in the case of Medicaid and Medicare patients — the government.

What is unclear is how this will affect other remuneration, such as doctors accumulating points that can be cashed in for a trip for using a specific brand of frames, Dr. Larkin said. "The safe harbor would be to not accept gifts or remuneration or discounts based on volume for materials that would be used on Medicare or Medicaid patients," he said.

Although there appears to be only a small number of optometrists who could be affected by the Stark regulations, those who do violate the regulations face serious repercussions. The penalties for violating the Stark law include forfeiture of any reimbursement for services rendered based on an unlawful referral, civil fines up to $100,000 and exclusion from the Medicare and Medicaid programs.

Potential Problem Areas Under the Stark II Law:
Working in an office owned by an ophthalmologist and referring patients back and forth. Involvement with a PPMC, a laser company, an ophthalmologist, a commercial entity or an optician. Sharing an eyeglass center at a separate location with a group of optometrists. Accepting gifts, remuneration or discounts based on volume for materials that are used on Medicare or Medicaid patients.

For Your Information:

David Mills, OD, is chairman of the American Optometric Association Federal Relations Committee and can be contacted at 1050 Centerville Rd., Warwick, RI 02886; (401) 821-8060; fax: (401) 828-3202.

Scott A. Edmonds, OD, can be contacted at The Edmonds Group, Suite 623, Swedesford Corporate Center, Frazer, PA, 19355; (800) 977-0436; (610) 644-0391; fax: (610) 325-9241; e-mail: Sedmonds@edmondsgroup.com.

Michael Larkin, OD, is an assistant professor at Southern California College of Optometry and can be contacted at 3502 Katella Rd., Ste. 101, Los Alamitos, CA 90720; (562) 430-6161; fax: (562) 598-3041.

The Proposed Rules for Medicare and Medicaid can be found on the Federal Register web site at www.access.gpo.gov/sudocs/fedreg/a980109c.html.