CMS Releases New Regulations to the Stark Physician Self-Referral Law
The Centers for Medicare & Medicaid Services (CMS) has issued "Phase II" of its final regulations addressing physician referrals to entities with which they have a financial relationship. The Stark II law was enacted in 1998 and "Phase I" of the regulations was published in 2001. The new regulations are effective July 26, 2004.
Stark has a significant impact on how physicians structure their business arrangements. The Stark physician self-referral law prohibits a physician from referring Medicare and Medicaid patients for certain designated health services to entities with which the physician (or a member of the physician's immediate family) has a financial relationship, unless an exception applies. A financial relationship can be either a compensation arrangement or an ownership or investment interest and can be either direct or indirect. The law also prohibits an entity from billing for services provided as the result of a prohibited referral.
Highlights of the New Stark Regulations
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Definition for "set in advance" permits certain common percentage compensation arrangements |
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Creation of safe harbor for fair market valuation of leases |
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Creation of safe harbor for hourly payments to physicians for personal services |
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More flexibility for academic medical center exception to Stark |
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Expansion of the medical staff incidental benefits Stark exception to include facilities other than hospitals |
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Protection for legitimate arrangements involving certain specialty groups that primarily furnish oncology and radiology services |
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Expansion of the Stark exception for certain dialysis-related drugs to include more drugs used in connection with dialysis treatment |
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Revision to Stark exception for Physician ownership of rural providers and hospitals (Note: The new regulations revise the hospital ownership exception to reflect the new 18-month moratorium on physician ownership of specialty hospitals.) |
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Exception for professional courtesy arrangements |
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Exception for charitable contributions by physicians to entities that furnish designated health services |
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Exception for payments made by a hospital or federally qualified health center to a physician to retain the physician's needed medical practice in a health professional shortage area |
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Exception for technology items or services furnished to physicians to enable their participation in a community-wide health information system. (Note: This exception is related to CMS's efforts to encourage provider use of electronic health records.) |
Impact of Regulations on Compensation Arrangements
The new regulations interpret a number of statutory exceptions for compensation arrangements involving physicians, including exceptions for space and equipment rentals, employment relationships, personal services arrangements and physician recruitment.
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