The Centers for Medicare and Medicaid Services has issued the second phase of its final regulations prohibiting physicians from making referrals to entities with whom they have a financial relationship. A study by HHS' Office of Inspector General revealed that excessive use of some services is encouraged when physicians have a financial relationship with the organizations to which they refer patients. CMS defines a financial relationship as either a compensation arrangement, an ownership or a direct or indirect investment interest. Organizations are also prohibited from billing for services provided as a result of a prohibited referral. The prohibition applies to durable medical equipment and supplies, physical therapy service and home health services, among others.

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