§1395xx Payment of Provider-based Physicians and Payment Under Certain Percentage Arrangements

Summary

The Secretary must write rules that tell which doctor services in hospitals or skilled nursing homes are personal, patient-by-patient medical care that can be paid under Part B, and which are general professional services that are paid only on a reasonable cost basis or under other specific payment rules. For cost-based payments, only the part of a hospital’s or facility’s costs that comes from those general professional services counts, and that share must be split based on how much time a doctor actually spends providing them. The Secretary will set a payment limit called the "reasonable compensation equivalent" and will not count costs above that amount, but can allow higher pay if a hospital shows it cannot hire enough doctors because of the limits. If a cost-based provider hires services under a contract that pays the contractor a percentage of the provider’s charges, revenue, or claims, those contract costs normally cannot be counted for reimbursement. That rule does not apply to the general-benefit physician services covered by the rules above. The Secretary may also allow percentage-based contracts when the amount is reasonable and the contract is a common business practice or encourages efficient operation, under regulations.