New Rules Limit Doctor Referrals to Own Clinics : Medicine: Federal ‘safe harbor’ guidelines spell out acceptable business relationships between physicians and facilities in which they have invested.

The federal government, trying to limit what it sees as self-dealing by physicians, has issued a new set of regulations to restrict doctors from referring Medicare and Medicaid patients to health care facilities in which they have a financial stake.

The so-called “safe harbor” restrictions are guidelines that spell out what is considered a clearly safe business relationship between doctors and medical facilities, such as clinical labs or imaging centers, where X-rays are taken. The U.S. Department of Health and Human Services released the rules, which took effect Monday.

And as they learn to deal with the restrictions, many Orange County physicians await an appellate decision in a precedent-setting case involving a Santa Ana-based clinical laboratory concern, Hanlester Network.

The inspector general of the Health and Human Services Department argued that Hanlester went afoul of a 1972 Medicare anti-kickback statute by allegedly making illegal payments to doctors who invested in the network’s labs and then later referred patients to those labs. The company won a favorable ruling by an adminstrative law judge in the spring, but the inspector general has appealed the decision.

Meanwhile, many health care attorneys predict the new, voluntary federal regulations may bring about changes for doctors who have invested in health care facilities as they attempt to bring their business relationships within the federal guidelines.

While there are no precise numbers on exactly how many doctors own part of a medical support facility, a American Medical Assn. survey last year found that about 8% of all physicians had some amount of ownership in health care facilities other than their primary office.

Many doctors enter into business relationships to retain an element of control over where their patients go, several health care attorneys contend. But it would be “naive to not suspect that (the business ventures) are at least in part a financial consideration,” said Dennis Weissman, president and publisher of a twice-monthly medical industry newsletter based in Washington.

The two major provisions in the revised regulations say: an investor with the power to refer patients must not own more than 40% of a medical concern, and no more than 40% of the revenue of that business may come from referrals by such investors. Violators of these guidelines face possible prosecution and exclusion from Medicare and Medicaid.

Some attorneys predict that many doctors who have made investments will be conservative and alter their referral practices to fall within safe-harbor protections. “People don’t want to take a chance,” said Richard Carpe, a health care consultant with the Arthur Anderson accountancy office in Irvine.

Patric Hooper, a Los Angeles-based health care attorney, said the revised regulations are too narrow to be helpful. The regulations tell investors what is allowed but do not say “what is legal or illegal,” he said.

Fortunately, doctor-clinic arrangements that do not fall within the safe-harbor guidelines will not necessarily be considered illegal, said Carl Weissburg, a health care attorney with Weissburg & Aronson Inc. in Los Angeles. “People have to learn to not be nuts about it,” he said.

But government officials suggest that the clarifications in the regulations are meant to help doctors avoid any violations of the Medicare anti-kickback statute, which calls for criminal charges, fines and prison terms for people who knowingly take kickbacks.

The government has tried to prosecute instances where a doctor who has invested in a care facility gets a referral fee based on the number of patients that are directed to that facility. However, the government has OKd doctors who receive fees based on the amount they invested in the facility.

Starting Jan. 1, doctors who have any investment interest in a clinical laboratory will be prohibited from referring Medicare patients to their clinics, according to recently passed federal legislation that was sponsored by Rep. Pete Stark (D-Oakland).