Health Care Alert. Health Care Reform Client Alert Series

August 2010 Authors: Paul W. Shaw paul.shaw@klgates.com +1.617.261.3111 Stephanie D. Wall stephanie.wall@klgates.com +1.412.355.8364 K&L Gates includes lawyers practicing out of 36 offices located in North America, Europe, Asia and the Middle East, and represents numerous GLOBAL 500, FORTUNE 100, and FTSE 100 corporations, in addition to growth and middle market companies, entrepreneurs, capital market participants and public sector entities. For more information, visit www.klgates.com. Health Care Reform Client Alert Series On March 23, 2010, President Obama signed into law the comprehensive health care overhaul known as the Patient Protection and Affordable Care Act ( PPACA ), Pub. Law 111-148. 1 This wide-ranging law has far-reaching implications on the financing and delivery of health care in the United States. In addition, it contains substantial changes to federal health care program requirements, including health care fraud and abuse provisions. The following K&L Gates LLP client alert is one in a series of alerts directed to the health care provider and supplier community that are focused on particular implications of PPACA as to the payment and regulation of health care providers and suppliers. Revisions to the Stark Law and Stark Regulations: Exceptions for In-Office Ancillary Services and Physician-Owned Hospitals Introduction Subject to specific exceptions, the Federal Physician Self-Referral Law, commonly known as the Stark Law, prohibits a physician from referring a Medicare patient for designated health services ( DHS ) 2 to an entity with which the referring physician (or an immediate family member) has a financial relationship, and prohibits the entity from performing or billing Medicare for services furnished as a result of a prohibited referral. 3 The Stark Law is a strict liability statute. Thus even a technical or de minimus violation can result in substantial potential liability, including significant civil monetary penalties. PPACA contains a number of amendments to the Stark Law, including a mandated self-disclosure protocol, new disclosure requirements for the in-office ancillary services exception, and curtailment of the physician-owned hospital exceptions. The Centers for Medicare and Medicaid Services ( CMS ) recently proposed implementing regulations for the in-office ancillary services and physician-owned hospital exceptions and therefore those two changes are the focus of this Alert. A separate Alert on the self-disclosure protocol will follow CMS s release of same. 1 On March 30, 2010, President Obama signed the reconciliation bill (H.R. 4872, the "Health Care and Education Reconciliation Act of 2010" or "Reconciliation Bill"), which amended PPACA. 2 The term DHS is defined at 42 U.S.C. 1395nn(h)(6) and 42 C.F.R. 411.351. 3 See 42 U.S.C. 1395nn.

Disclosures Under the In-Office Ancillary Services Exception Statutory Amendment: Section 6003(a) of PPACA One of the most widely used exceptions to the Stark Law is the in-office ancillary services exception ( IOAS ), which permits a physician to make referrals of certain DHS within the referring physician s own group practice that are ancillary to the physician s practice, e.g., laboratory testing. 4 Section 6003(a) of PPACA adds a requirement to the statutory exception that physicians making a referral under the IOAS exception for an MRI, CT or PET scan must make certain disclosures to patients. 5 This new notice provision requires the physician to inform the patient in writing at the time of the referral that the patient may obtain the services from someone other than the referring physician or his/her practice group and to provide a written list of suppliers who furnish such services in the area in which the patient resides. 6 While Section 6003(a) of PPACA specifies that the disclosure requirement applies to MRI, CT and PET services, the law authorizes CMS to include other radiology or imaging services that are DHS within this notice requirement as the Secretary determines appropriate. 7 Pursuant to Section 6003(b) of PPACA, the new notice requirement was to apply retroactively to services furnished on or after January 1, 2010. Proposed Regulations On July 13, 2010, CMS issued proposed regulations further expanding on this new statutory requirement. 8 While still in proposed form, CMS s proposed regulatory text and preamble discussion provide some clarification to the new notice requirement. CMS has also solicited comments from the industry to help further refine the requirement. Services that Trigger the Disclosure Requirement: At this time, CMS declined to expand the disclosure requirement beyond MRI, CT and PET services. However, CMS is soliciting comments regarding whether other radiology or imaging services that fall under the definition of DHS should be included. 9 General Disclosure Requirement: CMS is proposing that the disclosure notice be written in a manner that can be reasonably understood by all patients and be given to the patient at the time of the referral. 10 In addition, the disclosure may not suggest that the patient must receive such services from the provider giving the notice or any other supplier on the list. 11 CMS is proposing that, at a minimum, the list of alternative suppliers include the name, address, phone number, and distance from the physician s office location. At this time, CMS is not proposing any exceptions to the disclosure notice; however, it is soliciting comments on whether there should be exceptions for emergent or impracticable situations. 12 List of Alternative Suppliers: Who is a Supplier? Section 6003(a) of PPACA requires that the referring physician provide a list of suppliers. Suppliers are defined to include a physician or other practitioner, a facility, or other entity (other than a provider of services) that furnishes items or services[.] 13 A provider of service includes hospitals, critical access hospitals, skilled nursing facilities, comprehensive outpatient rehabilitation facilities, home health agencies, hospice programs, and other similar facilities. 14 At this time, CMS is not proposing that the notice include providers of service on the list of alternative suppliers; however, it is 4 See 42 U.S.C. 1395nn(b)(2). 5 See PPACA 6003(a); 42 U.S.C. 1395nn(b)(2). 6 7 See 42 U.S.C. 1395nn(h)(2)(D), 42 CFR 411.351. 8 See 75 Fed. Reg. 40,040 (July 13, 2010). 9 See 75 Fed. Reg. 40,141 (July 13, 2010). 10 11 12 See 75 Fed. Reg. 40,142 (July 13, 2010). 13 See 42 U.S.C. 1395x(d). 14 See 42 U.S.C. 1395x(u). August 2010 2

soliciting comments on whether it would be beneficial to the patients to include them. 15 Location of Supplier. While PPACA requires a list of alternative suppliers in the area in which the [patient] resides, CMS stated that it recognizes that it would be impractical for a physician to generate a list using that origination point. Instead, CMS is proposing that the list include alternative suppliers within a 25 mile radius of the physician s office location at the time of the referral. CMS is soliciting comments on this geographic scope whether it is sufficient for both urban and rural providers and whether there is a risk that physicians would list only suppliers at the edge of the geographic area. 16 Number of Suppliers. CMS is proposing that, at a minimum, the referring physician list 10 alternative suppliers within the 25 mile radius. The proposed language does not require the referring physician to list the 10 closest suppliers, but CMS is soliciting comments as to whether this requirement should be included. If there are less than 10 alternative suppliers in the 25 mile radius, CMS is proposing that the list include all alternative suppliers in the area up to the required 10. Interestingly, if there are no suppliers in the 25 mile radius, the referring physician would be exempted from the requirement of listing the alternative suppliers; however, the physician would still be required to disclose to his/her patients that they may receive such services from another supplier. 17 Documentation of Disclosure: CMS proposes that the physician include in the patient s chart a record of the patient s signature on the disclosure notice. CMS is soliciting comments on this, as well as any alternative means of 15 See 75 Fed. Reg. 40,141(July 13, 2010). 16 See 75 Fed. Reg. 40,141 40,142 (July 13, 2010). 17 recording that the disclosure was made to the patient. 18 Effective Date: CMS noted that it did not believe that the new notice requirement should apply retroactively to January 1, 2010. CMS is proposing that the notice requirement become effective January 1, 2011. 19 Physician-Owned Hospitals Section 6001 20 of PPACA amended the Stark Law to impose additional restrictions on physician ownership or investment in hospitals. These revisions essentially prevent the creation of new physician-owned hospitals, limit service expansions at existing physician-owned hospitals, and freeze the amount of physician ownership in existing hospitals as of March 23, 2010, the date the law was enacted. Under the Stark Law, there are statutory exceptions that permit referring physicians to have an ownership or investment interest in (1) a rural provider or (2) a whole hospital. 21 Section 6001 of PPACA mandates additional requirements for any referring physician s ownership or investment interest held in any hospitals that fall under either such exception to the Stark Law. The principal change includes the addition of a new Section 1877(i) [42 U.S.C. 1395nn(i)] to the Stark Law. 22 In addition, on July 2, 2010, CMS issued proposed regulatory text to implement the changes made to these two Stark Law exceptions (collectively, the Ownership Exceptions ). 23 18 See 75 Fed. Reg. 40,142 (July 13, 2010). 19 20 See PPACA 6001(a), as amended by 10601(a) of PPACA, and as amended by 1106 of the Reconciliation Bill. 21 42 U.S.C. 1395nn(d)(2) and 1395nn(d)(3), respectively. There is also an exception under the Stark Law for ownership or investment interest in a hospital located in Puerto Rico. 42 U.S.C. 1395nn(d)(1). 22 See PPACA 6001(a)(3). PPACA also made corresponding revisions to Stark s statutory exceptions 42 U.S.C. 1395nn(d)(2), the rural provider exception, and 1395nn(d)(3), the whole hospital exception to include the requirements of 42 U.S.C. 1395nn(i). See PPACA at 6001(a)(1) and (2). 23 CMS is proposing changes to 42 C.F.R. 411.356(c)(1) and (3) and adding a new 42 C.F.R. 411.362. See 75 Fed. Reg. 46,432 (Aug. 3, 2010). Section 411.356(c) changes the August 2010 3

CMS s proposed regulations are also discussed below. Prohibition of New Physician-Owned Hospitals. After December 31, 2010, the Stark Law s Ownership Exceptions will no longer be available for any newly formed hospitals with any physician owners or investors. The term physician owner or investor is defined to mean a physician (or immediate family member of the physician) with a direct or indirect ownership or investment interest in the hospital. 24 Reliance on the Ownership Exceptions will only be available if the physicians ownership or investment interest is created by December 31, 2010 in a hospital having a Medicare provider agreement in effect by that date. 25 In effect, no new hospitals with any physician owners or investors will be allowed to participate in the Medicare program after that date. 26 Prohibition on Expansion of Existing Physician-Owned Hospitals. Except for increases specifically authorized by CMS, existing hospitals may not add operating rooms, procedure rooms or beds for which the hospital is licensed as of March 23, 2010 for the purposes of compliance with the Ownership Exceptions. 27 The term procedure rooms is defined to include rooms in which catheterizations, angiographies, angiograms, and endoscopies are performed but does not include emergency rooms or departments (exclusive of rooms in which catheterizations, angiographies, angiograms, and endoscopies are performed). 28 Although PPACA permits CMS to define definition of rural provider. The provisions to be inserted by Section 411.362 are discussed in the body of this Alert. 24 See PPACA 6001(a)(3); 42 U.S.C. 1395nn(i)(5); proposed 42 C.F.R. 411.362(a). See 42 C.F.R. 411.351 for the definition of an immediate family member of a physician. 25 See 42 U.S.C. 1395nn(i)(1)(A) as implemented by PPACA at 6001(a)(3), as amended by 10601(a)(1) of the PPACA, and as amended further by 1106(1) of the Reconciliation Act. See also proposed 42 C.F.R. 411.362(b)(1). 26 CMS has proposed these requirements be incorporated into the proposed 42 C.F.R. 411.362(b)(1). 27 CMS has proposed this requirement be incorporated into the proposed 42 C.F.R. 411.362(b)(2). 28 See 42 U.S.C. 1395nn(i)(3)(G), as enacted by PPACA 6001(a), as amended by 1106(2)(C) of the Reconciliation Bill. procedure rooms to include rooms where other services are performed, CMS has stated that it is not proposing to do so at this time but is encouraging public comment on whether the definition should include rooms where additional services, such as CT or PET scans, or other services, are performed. 29 Exemption Process for Expansion Freeze by Certain Hospitals. HHS is required to promulgate regulations by January 1, 2010 and to implement a process by February 1, 2012 for certain hospitals to apply for exemptions to this expansion freeze. 30 Only hospitals that qualify as an applicable hospital or as a high Medicaid facility under PPACA will be eligible for this process. 31 An applicable hospital is defined as a hospital: 1. That is located in a county in which the percentage increase in the population during the most recent 5-year period (as of the date of the application requesting the exemption) is at least 150% of the percentage increase in the population growth of the state in which the hospital is located during that period, as estimated by the Bureau of Census; 2. Whose annual percent of total inpatient admissions that represent inpatient admissions under the Medicaid program is equal to or greater than the average percent with respect to such admissions for all hospitals in the county in which the hospital is located; 3. That does not discriminate against beneficiaries of federal health care programs and does not permit 29 See 75 Fed. Reg. 46,4323 (Aug. 3, 2010) 30 See 42 U.S.C. 1395nn(i)(3)(A) as implemented by PPACA at 6001(a)(3), as amended by 10601(a)(2) of the PPACA. 31 42 U.S.C. 1395nn(i)(3)(A)(i), as implemented by PPACA at 6001(a), as amended by 1106(2)(A) of the Reconciliation Bill. August 2010 4

physicians practicing at the hospital to discriminate against such beneficiaries; 4. That is located in a state in which the average bed capacity in the state is less than the national average bed capacity; and 5. That has an average bed occupancy rate that is greater than the average bed occupancy rate in the state in which the hospital is located. 32 A high Medicaid facility is defined as a hospital that: 1. Is not the sole hospital in a county; 2. With respect to each of the three most recent years for which data are available, has an annual percent of total inpatient admissions that represent inpatient admissions under Medicaid that is estimated to be greater than such percent with respect to such admissions for any other hospital located in the county in which the hospital is located; and 3. Does not discriminate against beneficiaries of federal health care programs and does not permit physicians practicing at the hospital to discriminate against such beneficiaries. 33 These hospitals, however, may only seek an exception once every two years. In addition, any increase cannot exceed 200% of the hospital s baseline number of licensed operating rooms, procedure rooms, and beds as of March 23, 2010. Or, in the case of a hospital that did not have a provider agreement on March 23, 2010, but did have one in place by December 31, 2010, then the baseline is measured as of the 32 See 42 U.S.C. 1395nn(i)(3)(E) as implemented by PPACA at 6001(a). 33 See 42 U.S.C. 1395nn(i)(3)(F) as implemented by PPACA at 6001(a)(3), as amended by 1106(2)(D) of the Reconciliation Bill. date of the provider agreement. 34 Any increase in the number of licensed operating rooms, procedure rooms, and beds may only occur on the main campus of the applicable hospital. 35 The limitation on expansion applies regardless of whether or not such rooms or beds are licensed. 36 Finally, PPACA provides that there shall be no administrative or judicial review of the process to obtain an exception to the prohibition on expansion of facility capacity. 37 Freeze on Physician Investments in Physician-Owned Hospitals. PPACA freezes the aggregate percentage of physician ownership in physician-owned hospitals to the percentage existing as of March 23, 2010. Therefore, if a hospital has no physician ownership as of March 23, 2010, and later adds any physician owners or investors, the hospital would not qualify for the Ownership Exceptions. Additionally, if a hospital had physician ownership as of March 23, 2010, it may reduce or increase the number of physician owners, provided the percentage of the total value of physician ownership or investment interests, in the aggregate, remains the same or decreases. 38 Prohibition on Conversion from Ambulatory Surgical Centers. The Ownership Exceptions will not be available to hospitals that convert from an ambulatory surgical center ( ASC ) to a hospital on or after March 23, 2010. 39 34 See 42 U.S.C. 1395nn(i)(3)(C)(iii) as implemented by PPACA 6001(a)(3), as amended by 1106(2)(B) of the Reconciliation Bill. 35 See 42 U.S.C. 1395nn(i)(3)(D) as implemented by PPACA 6001(a)(3). 36 See 75 Fed. Reg. 46,433 (Aug. 3, 2010) 37 See 42 U.S.C. 1395nn(i)(3)(I), as implemented by PPACA 6001(a), as amended by 1106(2)(C) of the Reconciliation Bill. 38 See PPACA 6001(a)(3); 42 U.S.C. 1395nn(i)(1)(D)(i); and proposed 42 CFR 411.362(b)(4)(i). See 75 Fed. Reg. 46,433 (Aug. 3, 2010) 39 See PPACA 6001(a)(3) and 42 U.S.C. 1395nn(i)(1)(F). CMS has proposed this requirement be incorporated into proposed 42 C.F.R. 411.362(b)(6). August 2010 5

Ensuring Bona Fide Investment. Section 6001(a) of PPACA, adding 42 U.S.C. 1395nn(i)(1)(D) to the Stark Law, sets forth seven different requirements related to ensuring bona fide investment in order for hospitals to qualify for the whole hospital exception set forth in the Stark Law. First, the percentage of the total value of the ownership or investment interests held in the hospital, or in an entity whose assets include the hospital, by physician owners or investors in the aggregate may not exceed such percentage as of March 23, 2010. Second, any ownership or investment interests that the hospital offers to a physician owner or investor must not be offered on more favorable terms than the terms offered to a person who is not a physician owner or investor. Third, the hospital (or any owner or investor in the hospital) must not directly or indirectly provide loans or financing for any investment in the hospital by a physician owner or investor. Fourth, the hospital (or any owner or investor in the hospital) must not directly or indirectly guarantee a loan, make a payment toward a loan, or otherwise subsidize a loan, for any individual physician owner or investor or group of physician owners or investors that is related to acquiring any ownership or investment interest in the hospital. Fifth, the ownership or investment returns must be distributed to each owner or investor in the hospital in an amount that is directly proportional to the ownership or investment interest of such owner or investor in the hospital. Sixth, physician owners and investors must not receive, directly or indirectly, any guaranteed receipt of, or right to purchase, other business interests related to the hospital, including the purchase or lease of any property under the control of other owners or investors in the hospital or located near the premises of the hospital. Lastly, the hospital must not offer a physician owner or investor the opportunity to purchase or lease any property under the control of the hospital or any other owner or investor in the hospital on more favorable terms than the terms offered to an individual who is not a physician owner or investor. 40 A hospital may request an advisory opinion for a determination of whether an existing or proposed arrangement meets the requirements for hospitals to ensure that the investment is bona fide. 41 Disclosure Requirements to Patients. Existing physician-owned hospitals must disclose the fact that the hospital is partially owned by physicians on the hospital s public website as well as in any public advertising by the hospital. 42 Additionally, each existing physician-owned hospital must have procedures in place to require any referring physician owner or investor to disclose, in sufficient time to allow the patient to make a meaningful decision regarding his or her receipt of care, the following information in writing to the patient being referred: 1. The referring physician s ownership or investment interest in the hospital; and 40 See PPACA 6001(a)(3) and 42 U.S.C. 1395nn(i)(1)(E). CMS recently proposed adding all of the same statutory requirements into proposed 411.362(b)(4) to 42 C.F.R. Part 411 to incorporate these provisions in its regulations. CMS also stated that additional or different factors may be relevant to a determination of whether an investment is bona fide for purposes of complying with other laws, including fraud and abuse laws. See 75 Fed. Reg. 46,434 (Aug. 3, 2010). 41 See 75 Fed. Reg. 46,434 (Aug. 3, 2010). 42 See PPACA 6001(a)(3) and 42 U.S.C. 1395nn(i)(1)(C)(i). CMS has proposed this requirement be incorporated into proposed 42 C.F.R. 411.362(b)(3)(ii)(C); however, there is a discrepancy between the statute and the proposed regulatory text. The proposed regulatory text says that the hospital must disclosure the fact on its website or in any public advertising by the hospital. The statutory language, however, requires disclosures by both means and the commentary to the proposed regulation indicates the same, so the proposed regulatory text may be a typo. See 75 Fed. Reg. 46,4333 (Aug. 3, 2010). August 2010 6

2. If applicable, any such ownership or investment interest of the treating physician. 43 CMS proposes that hospitals require each referring physician owner or investor who is a member of the hospital s medical staff to agree, as a condition of continued medical staff membership or admitting privileges, to provide the above disclosure to all patients who the physician refers to the hospital at the time the referral is made. 44 Additionally, the hospital cannot condition any physician ownership or investment interests either directly or indirectly on the physician owner or investor making or influencing referrals to the hospital or otherwise generating business for the hospital. 45 CMS is soliciting comments on all of its proposals, including the following: CMS declined to define treating physician stating that it will consider a treating physician to be those physicians who are responsible for any aspect of a patient s care or treatment. Whether the disclosure should be on the hospital s home page or another page of its website, or on all pages; what constitutes public advertising; and whether there should be a minimum font size. 46 43 See PPACA 6001(a)(3) and 42 U.S.C. 1395nn(i)(1)(C)(ii). CMS recently commented that we do not believe the disclosures to be made by physicians will be burdensome. For example, a physician owner or investor could provide a written, form notice to each patient that discloses the physician s ownership or investment interest in the hospital, informs the patient that his or her treating physician may have an ownership or investment interest in the hospital, and directs the patient to review an attached list identifying all other physician owners or investors in the hospital. This notice may be used by the patient to make a meaningful decision regarding his or her receipt of care. 75 Fed. Reg. 46,4333 (Aug. 3, 2010). 44 See proposed 42 C.F.R. 411.362(b)(3)(ii)(A); See 75 Fed. Reg. 46,4333 (Aug. 3, 2010). 45 See PPACA 6001(a)(1) and 42 U.S.C. 1395nn(i)(1)(C)(iii). CMS has proposed this requirement be incorporated into proposed 42 C.F.R. 411.362(b)(3)(ii)(B), 75 Fed. Reg. 46,4333 (August 3, 2010). 46 See 75 Fed. Reg. 46,4334 (Aug. 3, 2010). Patient Safety. PPACA requires a hospital have the capacity to provide assessment and initial treatment for all patients and the ability to refer and transfer patients to hospitals with the capability to treat the needs of the patient involved. 47 CMS s proposed regulations provide that the hospital inpatient stay or outpatient visit begin with the provision of a package of information regarding scheduled preadmission testing and registration for a planned hospital admission for inpatient care or an outpatient service. 48 PPACA also requires that before admitting or providing services to a patient, if the physicianowned hospital does not have a physician on the premises during all hours in which the hospital is providing services to such patient, the hospital must inform the patient of that fact and receive a signed acknowledgement that the patient understands this fact. 49 In the commentary, CMS is proposing to apply these patient safety standards to both inpatients and outpatients. 50 Reporting Requirements to HHS. PPACA requires each physician-owned hospital to submit an annual report to HHS containing a detailed description of the identity of each physician owner or investor and any other owners or investors of the hospital, and the nature and extent of all ownership and investment interests in the hospital. 51 This information will be posted on the CMS website. 52 CMS will be proposing procedures for this reporting requirement at a later time. 53 47 See PPACA 6001(a)(3); 42 U.S.C. 1395nn(i)(1)(E)(ii). CMS also proposed these requirements be incorporated into the proposed 42 C.F.R. 411.362(b)(5). 48 See 75 Fed. Reg. 46,4334 (Aug. 3, 2010; proposed 42 C.F.R. 411.362(b)(5)(ii). 49 See PPACA 6001(a)(3); 42 U.S.C. 1395nn(i)(1)(E)(i). CMS also proposed these requirements be incorporated into the proposed 42 C.F.R. 411.362(b)(5). 50 See 75 Fed. Reg. 46,4334 (Aug. 3, 2010). 51 See PPACA 6001(a)(3); 42 U.S.C. 1395nn(i)(1)(C). 52 See PPACA 6001(a)(3); 42 U.S.C. 1395nn(i)(2). 53 See 75 Fed. Reg. 46,4334 (Aug. 3, 2010). August 2010 7

Enforcement and Audits. PPACA requires HHS to establish policies and procedures to ensure compliance with the new requirements of the Stark Law, which may include unannounced site reviews of hospitals. 54 Additionally, beginning not later than May 1, 2012, HHS is required to conduct audits to determine if physician-owned hospitals are in compliance with the new requirements of the Stark Law imposed by PPACA. 55 Potential Revocation of Hospital Provider Agreement. Section 6001(a)(6) of PPACA expressly states that nothing in the new Stark Law provisions (42 U.S.C. 1395nn(i)) shall be construed as preventing HHS from revoking a hospital s provider agreement for failure to comply with the regulations implementing 42 U.S.C. 1395cc, relating to various conditions of participation in the Medicare program. 56 Recommendations If you have any comments or recommendations on these important revisions, you may want to send them to CMS for consideration in accordance with the following dates. In-Office Ancillary Services Exception: CMS is soliciting comments on these proposed regulations by no later than 5:00 pm on August 24, 2010. Ownership Exceptions. CMS is soliciting comments on these proposed regulations by no later than 5:00 pm on August 31, 2010. Effective Dates for Stark Changes. PPACA provides that physician-owned hospitals must meet the requirements of new section, 42 U.S.C. 1395nn(i), by September 23, 2011, except for those provisions that expressly provide for a different compliance/effective date. 57 For example, PPACA provides that the hospital must have had the physician ownership or investment on December 31, 2010, and a provider agreement in effect on that date. 58 Additionally, PPACA provides that the percentage of the total value of physician ownership or investment interests held in the hospital, in the aggregate, must not exceed such percentage as of March 23, 2010. Also, hospitals cannot convert from an ASC on or after March 23, 2010. 54 See PPACA 6001(b)(1). 55 See PPACA 6001(b)(2), as amended by PPACA 10601(b). 56 See PPACA 6001(a)(6); 42 U.S.C. 1395nn(i)(6). 57 See 42 U.S.C. 1395nn(d)(2)(C), as amended by PPACA 6001(a)(1); and 1395nn(d)(3)(D), as amended by PPACA 6001(a)(2). 58 See 42 U.S.C. 1395nn(i)(1)(A) as implemented by PPACA at 6001(a)(3), as amended by 10601(a)(1) of the PPACA, and as amended further by 1106(1) of the Reconciliation Act. See also proposed 42 C.F.R. 411.362(b)(1). August 2010 8

For additional information, please contact: Boston Paul W. Shaw paul.shaw@klgates.com 617.261.3111 Chicago Thomas C. Shields thomas.shields@klgates.com 312.807.4232 Dallas/Ft. Worth Jonathan K. Henderson jon.henderson@klgates.com 817.347.5278 Harrisburg Ruth E. Granfors ruth.granfors@klgates.com 717.231.5835 Newark Stephen A. Timoni stephen.timoni@klgates.com 973.848.4020 Pittsburgh Edward V. Weisgerber ed.weisgerber@klgates.com 412.355.8980 Stephanie D. Wall stephanie.wall@klgates.com 412.355.8364 Research Triangle Park Mary Beth Johnston marybeth.johnston@klgates.com 919.466.1181 Miami William J. Spratt william.spratt@klgates.com 305.539.3320 Anchorage Austin Beijing Berlin Boston Charlotte Chicago Dallas Dubai Fort Worth Frankfurt Harrisburg Hong Kong London Los Angeles Miami Moscow Newark New York Orange County Palo Alto Paris Pittsburgh Portland Raleigh Research Triangle Park San Diego San Francisco Seattle Shanghai Singapore Spokane/Coeur d Alene Taipei Tokyo Warsaw Washington, D.C. K&L Gates includes lawyers practicing out of 36 offices located in North America, Europe, Asia and the Middle East, and represents numerous GLOBAL 500, FORTUNE 100, and FTSE 100 corporations, in addition to growth and middle market companies, entrepreneurs, capital market participants and public sector entities. For more information, visit www.klgates.com. K&L Gates is comprised of multiple affiliated entities: a limited liability partnership with the full name K&L Gates LLP qualified in Delaware and maintaining offices throughout the United States, in Berlin and Frankfurt, Germany, in Beijing (K&L Gates LLP Beijing Representative Office), in Dubai, U.A.E., in Shanghai (K&L Gates LLP Shanghai Representative Office), in Tokyo, and in Singapore; a limited liability partnership (also named K&L Gates LLP) incorporated in England and maintaining offices in London and Paris; a Taiwan general partnership (K&L Gates) maintaining an office in Taipei; a Hong Kong general partnership (K&L Gates, Solicitors) maintaining an office in Hong Kong; a Polish limited partnership (K&L Gates Jamka sp. k.) maintaining an office in Warsaw; and a Delaware limited liability company (K&L Gates Holdings, LLC) maintaining an office in Moscow. K&L Gates maintains appropriate registrations in the jurisdictions in which its offices are located. A list of the partners or members in each entity is available for inspection at any K&L Gates office. This publication is for informational purposes and does not contain or convey legal advice. The information herein should not be used or relied upon in regard to any particular facts or circumstances without first consulting a lawyer. 2010 K&L Gates LLP. All Rights Reserved. August 2010 9