On May 13, 2004, the Justice Department filed an appeal notice to maintain its ability to appeal the March 4, 2004, jury decision that St. David's Health Care System, Inc., continues to be tax-exempt notwithstanding its decision to contribute substantially all of its operating assets into a joint venture with HCA, Inc. While the notice is not a formal appeal of the jury's decision, it does preserve the government's ability to pursue an appeal.

Many health care organizations that are not required to comply with the new corporate governance rules established by the Sarbanes-Oxley Act have opted to do so.

On March 26th, the United States District Court for the District of Columbia issued an important decision in Baystate Medical Center v. Thompson. The Baystate case is the lead case in a group of consolidated actions involving more than 3,000 fiscal years for over 600 Medicare hospitals.

By popular demand, Vinson & Elkins will be repeating the program recently held in our Austin office. On Friday, June 18, V&E will host a lunch seminar on the new Stark II Phase II Final Regulations at our Houston office. Our speaker once again will be Donna Clark, a nationally recognized authority on Stark and illegal remuneration. Donna will address the general and specific application of Stark II to hospitals, academic medical centers, and physicians, including: personal services arran

Section 937 of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 ("MMA") requires the Secretary to establish a process for physicians, providers, and suppliers to correct minor errors and omissions in claims without pursuing the formal appeals process. In a Medlearn Matters Article posted to its website, CMS explains that minor corrections can be made with existing procedures.

On April 30, 2004, the Centers for Medicare and Medicaid Services ("CMS") announced the final rule revising the criteria for classifying hospitals as inpatient rehabilitation facilities ("IRFs") for purposes of Medicare payment. CMS states that in response to extensive public comment it has modified a number of provisions found in the proposed rule.

The rising cost of malpractice insurance has led many tax-exempt hospitals to search for ways to assist the physicians on their medical staffs in obtaining reasonably priced malpractice insurance coverage. In a letter to the IRS, the OIG, and CMS, the American Health Lawyers Association is seeking clarification and guidance regarding ways that health care facilities can lawfully assist their physicians through malpractice insurance support programs.

Last week, CMS posted on its website a statement clarifying an issue that has been much discussed in the industry -- physician recruitment agreements that predate the July 26, 2004, effective date of the Stark II, Phase II regulations (the "Regulations") must comply with the Regulations as of that date. This will impact agreements that involve physician recruits who have joined existing groups.

The Centers for Medicare and Medicaid Services ("CMS") announced recently that it plans to take a series of steps regarding Medicare coverage and payment policies that apply to power wheelchairs and power scooters based upon recent successes in reducing Medicare abuse in these areas. CMS is implementing a three-pronged approach that focuses on coverage, payment, and quality of suppliers of power wheelchairs. The new three-pronged approach is as follows: (1) CMS plans to develop additional gui

On March 26, 2004, the U.S. Court of Appeals for the Seventh Circuit ruled in Northwestern Memorial Hospital v. Ashcroft that a subpoena seeking abortion records was properly quashed (i.e., nullified).

The Centers for Medicare & Medicaid Services ("CMS") published a 65-page instruction transmittal (Change Request 3159, Transmittal 69) on March 26, 2004, which instructs fiscal intermediaries and carriers on requirements for reviewing the CMS-855 forms.

On April 13, 2004, the Ninth Circuit, in United Health Services v. Thompson, rejected an action brought by 79 hospitals and two health care corporations challenging Medicare outlier reimbursement rates. The Medicare statutes require the government to prospectively set outlier thresholds that determine which cases are costly enough to warrant additional reimbursement.

The Centers for Medicare and Medicaid Services (CMS) announced two proposed regulations mandated by the Medicare Modernization Act. One rule describes the structure for the voluntary prescription drug benefit, while the other rule outlines the new Medicare Advantage program with its regional preferred provider organizations.

On May 6, the IRS released Revenue Ruling 2004?51, 2004-22 I.R.B. --, examining an educational joint venture involving a tax-exempt university and for profit company specializing in interactive video training programs. The parties form a joint venture through which teacher training seminars will be conducted. The university controls the educational content delivered by the joint venture while the for-profit company is primarily responsible for presentation of the material and technical support