Medicare and Medicaid programs; physicians' referrals to health care entities with which they have financial relationships--HCFA. Proposed rule.

This proposed rule would incorporate into regulations the provisions of sections 1877 and 1903(s) of the Social Security 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 under the Medicare program, unless certain exceptions apply. The following services are designated health services: 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. Inpatient and outpatient hospital services. In addition, section 1877 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 designated health services furnished under a prohibited referral, nor may the Secretary make payment for a designated health service furnished under a prohibited referral. Section 1903(s) of the Social Security Act extended aspects of the referral prohibition to the Medicaid program. It denies payment under the Medicaid program to a State for certain expenditures for designated health services. Payment would be denied if the services are furnished to an individual on the basis of a physician referral that would result in the denial of payment for the services under Medicare if Medicare covered the services to the same extent and under the same terms and conditions as under the State plan. This proposed rule incorporates these statutory provisions into the Medicare and Medicaid regulations and interprets certain aspects of the law. The proposed rule is based on the provisions of section 1903(s) and section 1877 of the Social Security Act, as amended by section 13562 of the Omnibus Budget Reconciliation Act of 1993, and by section 152 of the Social Security Act Amendments of 1994.