New Stark Rules Bring Major Changes

On August 19, 2008, the Centers for Medicare and Medicaid

Services ("CMS") published the latest changes to the

Stark Law. As you know, the Stark Law regulates the types of

arrangements into which physicians may enter. Violations of the

Stark Law bring hefty civil fines and penalties.

This latest set of changes to the regulations will affect

many physician arrangements, requiring many to be restructured

or terminated before the effective date of the applicable

provisions on October 1, 2008 or October 1, 2009. It cannot be

overly stressed how important compliance is with these new

regulations. Our concern is that these regulations will have

broader application than advertised and that unintended

arrangements will be affected, particularly with respect to the

first three changes discussed below.

"Under Arrangements" Under Siege

The final rule deals with a perception by CMS that

"under arrangements" structures, through which a

hospital provides certain services to its patients by

contracting with another entity to furnish the service, are

being used abusively to reward physicians for referring

patients to the hospital.

As contemplated by CMS for Stark purposes, an "under

arrangement" structure occurs when a hospital essentially

outsources its technical needs, such as MRI, to a group of

physicians who refer to the hospital. Typically, the group is

paid a fee for the procedures done and the hospital is able to

bill Medicare directly for such procedures. These arrangements

currently permit physicians to be paid by the hospital for

procedures performed, not just on the owner physician's own

patients, but on other providers' patients, as well. The

"abuse" that is perceived is that, according to CMS,

there really is no need for these types of arrangements except

to tie physicians to the hospital and obtain their loyalty and

referrals.

The solution promulgated by CMS is to redefine the term

"entity" to include under one definition both the

entity that performs the service and the entity that

bills for the service, treating them as an amalgamated unit for

purposes of wrapping in the DHS into one entity. That being

done, physician owners of the group that furnishes the service

may not refer to the "under arrangements" service,

and the combined "entity" is prohibited, absent an

exception, from billing CMS for the service.

Because it will be difficult, if not impossible, for the

"under arrangements" relationship to fit within a

Stark exception with...