If your work involves any legal issues associated with physicians and hospitals, there is a good chance you have heard references made to the “Stark law.” That is the common nickname given to the Federal physician self-referral law after its principal sponsor, Congressman Pete Stark of California. The Stark law prohibits physicians from having certain arrangements with entities to which the physicians refer Medicare patients unless the arrangement fits within one of the numerous Stark law exceptions.
One fundamental purpose of the Stark law was to prevent physicians from owning certain types of facilities to which they could refer patients and thus realize a profit. The law also seeks to preclude abusive arrangements between physicians and hospitals. When the law first went into effect in 1992, Congressman Stark claimed the law would establish a “bright line” providing “unequivocal guidance” regarding the types of arrangements that were prohibited. Over 15 years later, though, the law and its associated exceptions are still being refined and expanded.
Twice this year, the Centers for Medicare and Medicaid Services (“CMS”), the agency charged with enforcement of the Stark law, has issued further guidance. In July, CMS included a set of proposed Stark regulatory changes as part of the rule updating the Medicare physician fee schedule. The proposed changes included a number of comments aimed at certain types of arrangements that CMS believes to be problematic. One example is where a physician leases equipment to an entity and receives a “per-click” lease payment; i.e., a payment each time the equipment is used. Although previously CMS stated such per-click payments were permissible under the Stark law, in the July regulations CMS indicated that such payments are problematic in cases where the physician is able to refer patients to the entity for services using the equipment. In other words, it is a problem when the physician is aware that each patient referral he or she makes will result in another per-click lease payment.
As noted above, the status of the July regulations is “proposed” and they were subject to a comment period that ended on August 31. However, just several days prior to that date, on August 27, CMS issued the so-called “Phase III” of the Stark regulations. The status of those rules is “final” and they will go into effect on December 4. They represent CMS’s further efforts to refine and clarify the various Stark law exceptions, which now have grown to 23 in number. One noteworthy aspect of the Phase III rules is that CMS continues to pay particular attention to the needs of physicians and hospitals located in rural areas. Certain arrangements that implicate the Stark law are permissible for physicians and hospitals in rural areas that are not permitted for those in urban locations, and Phase III continues to refine certain exceptions in response to the particular needs of rural providers.
CMS is to be applauded for its efforts to “have reduced the regulatory burden on the health care industry” as stated in the beginning of the Phase III regulations. Phase III represents another positive step toward clarifying a number of ambiguities under the Stark law. But as hospitals and physicians continue working together in areas such as recruitment, employment, and joint ventures, it is highly likely that further issues will develop under the Stark law, meaning the exceptions will continue requiring refinement by CMS. Thus, Congressman Stark’s goal of a “bright line,” while noble, probably will remain quite elusive for some time in the future.« Back to news