From the Home Office, The Top Ten Changes Brought About By the New Stark Regulations
By: STEVEN N. BECK
Spring 2001
The end of the Clinton administration brought with it a few interesting issuances from the government relating to the healthcare industry. Among these was a portion of the final Stark regulations. The final rules have been in process for a number of years and revise substantially the proposed regulations, which were based on a very tight reading of the Stark law. By contrast, the final laws surprised many lawyers by stepping back significantly from the level of regulation that HCFA had previously announced. There are many interesting effects and some nuances of interpretation that will continue to be studied in the months to come. In addition, HCFA promises to release the second half of the regulations sometime in the near future. As to this promise, it is wise not to hold one's breath. That said, here are the most striking features of the new regulations:
10. The regulation will not be effective for one year. Presumably during this time period the law will continue to be essentially unenforced. The government has said that the one-year period is intended for physicians and others to work in good faith to put non-compliant relationships into compliance. It is possible, though not extremely likely, that some private plaintiff will bring a qui tam action based on Stark and will ignore the one year grace period.
9. The definition of designated health services is based on a list of CPT codes, including some physician services, most prominently radiology services. This is a major departure from the prior assumption that Stark did not regulate physician services.
8. Radiology services do not include nuclear medicine or interventional radiology (except when in the hospital). Lithotripsy is not excluded from the list of hospital services.
7. The "entity" that may be subject to Stark prohibitions on certain referrals is the entity to which HCFA makes payment for the designated health services, whether directly, upon assignment, or under a permitted reassignment. Thus, Stark does not prohibit referrals to an entity that does not bill Medicare for the service. Similarly, a "hospital" does not include the entities that perform services for hospitals "under arrangements."
6. For purposes of the in-office ancillary exception, locum tenens and on-call physicians are considered members of the group. Independent contractors are also group practice physicians for purposes of the protection afforded by the in-office ancillary exception.
5. The supervision requirement in the in-office ancillary exception has been changed from "direct supervision" to the level of supervision otherwise required by Medicare.
4. A "unified business" definition has been added to deal with professional practices that are structured as separate divisions or cost centers. Most importantly, location and specialty-based compensation practices are permitted if the division consists of at least five physicians.
3. A catch-all compensation exception permits overall profits to be divided in a reasonable and verifiable manner that is not directly related to the volume or value of the physicians' referrals of designated health services.
2. For purposes of the compensation exceptions, compensation may be deemed to be "set in advance" if it is a fixed payment per time or per unit of service. This kind of compensation system will be permitted even if the units of service or units of time result from referrals made by the physician, as long as the payment per unit of service or per time is reasonable and as long as the patient has the right to refuse the referral.
1. Indirect compensation arrangements exclude arrangements with an intervening entity if the physician does not receive aggregate compensation from the entity that takes into account the volume or value of referrals. This is a companion to the compensation exception language described in #3 and may save some arrangements from the Stark prohibition.
The upshot of the new rules is that arrangements that formerly seemed to contravene Stark may now be okay. Physicians and providers may wish to review their strategic affiliations in light of the new reality.