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EPO and other dialysis-related drugs exception

EPO and other dialysis-related outpatient prescription drugs furnished in or by an ESRD facility

42 CFR 311.355(g) provides an ownership/compensation exception applicable to referrals for erythropoietin (EPO) and other dialysis-related outpatient prescription drugs when a physician has an ownership/investment and/or compensation relationships with the end-stage-renal-disease (ESRD) entity furnishing such services.

The specific drugs allowed under the exception are identified by the final rule’s list of CPT codes. The exception applies only when:
  • EPO and other dialysis drugs are furnished in or by an ESRD facility. For purposes of this provision, the drugs are furnished when administered or dispensed to a patient in or by the ESRD facility, even if furnished to the patient at home. Dialysis-related drugs means certain drugs required for the efficacy of dialysis as identified by CMS on its Web site; 
  • The arrangement does not violate the federal antikickback statute; and
  • Billing and claims submission for the EPO and other dialysis-related drugs does not violate any federal or state laws and regulations governing billing and claims submission.
This exception does not apply to any other financial relationships between the referring physician and any entity other than the ESRD facility that furnishes the EPO and other dialysis-related drugs to the patient.  Moreover, it does is limited solely to the drugs identified on the list, so it will not address other drugs (e.g., antibiotics that may routinely provided in connection with dialysis services). 
For purposes of the rule, EPO and other dialysis related outpatient prescription drugs are “furnished” when they are administered to a patient in the ESRD facility, or in the case of EPO or Aranesp (or equivalent drugs identified on the list of CPT codes) only, are dispensed by the ESRD facility for use by the patient at home.

In commentary to the final rule, CMS notes that Congress did not intend to preclude physician ownership of ESRD facilities through the enactment of the Stark law. CMS concluded that this exception was required to allow for physician referrals to ESRD facilities, along with the furnishing of EPO in connection with services at those facilities, even though services in an ESRD facility are paid for at a composite rate.

In its commentary, CMS stresses that the exclusion for financial relationships involving referrals for EPO in ESRD facilities only applies in the exception of physician-owned and -operated ESRD facilities, and not to EPO furnished in any other setting. Thus, the exception does not protect physician investments in home dialysis companies or similar organizations that may provide EPO to an ESRD facility, nor does it apply to ownership/investment interests in entities other than ESRD facilities that furnish EPO and/or other dialysis-related drugs.

The exception's exclusion of EPO provided in an ESRD facility also does not exclude EPO from the Stark law's definition of outpatient prescription drugs. Rather, the exception allows the financial relationship between a referring physician and an ESRD facility so that the physician can make referrals to that facility for EPO, and the ESRD facility can bill for and receive payment for the EPO and other covered outpatient prescription drugs under the facility’s composite rate payment arrangement. The exception does not, however, exclude EPO from the category of designated health services that are subject to the Stark law, so referrals for EPO furnished in other settings with which the physician has a financial relationship with the entity furnishing the EPO would need to meet an exception applicable to that financial relationship.

Likewise, CMS limited the exception to referrals for the specific services identified, but it does not apply to any other services that are identified as being covered under the exception. This means, for example, that the exception does not cover clinical laboratory services that may be furnished by the ESRD facility that are not paid for under the ESRD rate structure, nor does the exception cover other outpatient prescription drugs that are furnished by the ESRD facility, but not covered under the composite rate. The provision does not allow ESRD facilities from furnishing outpatient prescription drugs (other than EPO and Aranesp) that the facility can dispense to patients for use at home.
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