Press Releases

5/9/2003

For Immediate Release

Qualifications For Rural Exemption To Social Security Act Section 1877

CONTACT:
For questions or comments, please contact Susan Visconti at (330) 425-1313 X2701
viscontis@hitachimed.com

What is the Social Security Act, Section 1877?

This section of the Act reviews the limitations set forth by the Centers for Medicare and Medicaid Services (CMS) in regard to self-referrals for designated heath services. Typically, the ACT prohibits physicians from referring patients for health services to any site in which the referring physician has a financial or personal business interest, unless an approved exemption applies. This section of the Act, commonly referred to as the self-referral clause, prohibits Medicare and Medicaid reimbursement for services performed under such a relationship. In addition to lack of reimbursement, additional penalties may be assessed against imaging centers determined to be in violation of Section 1877.

Are there any exceptions to Section 1877?

The Act does not cover all health care services, although it does cover the majority of diagnostic imaging services. The Act also includes a limited number of exemptions to Section 1877, one of which is the Rural Provider Exemption, as defined in Section 1886(d)(2)(D) of the Act.

What is the Rural Provider Exemption, and how does it work?

For centers located in rural areas, an exemption to section 1877 of the Act may exist, if the center meets BOTH of the following criteria:

• the provider is located in an area designated by CMS as “rural”

• “substantially all” of the services provided at the site are conducted on individuals residing in a CMS-designated rural area.

For continued exemption coverage, the health center must be able to demonstrate ongoing conformance to both of these criteria.

What are the benefits of operating within the rural exemption?

If the center does qualify for the rural exemption, the following additional opportunities may be exist:

• increased caseload through acceptable and approved self-referrals

• qualification for Medicare/Medicaid reimbursements

• increased reimbursements from third party payors whose payment formula is based upon a percentage of the approved CMS reimbursement level (i.e. 150% of CMS rate).

NOTE: The information contained herein is intended as an overview summary, to be used for educational purposes only, and shall not be used in any manner to compete with the business or operations of HMSA. This information is believed to be reliable and accurate, however, HMSA makes no representation or warranty as to the accuracy or completeness of such information. For verification, clarification or further information, contact legal counsel.