By one measure, the Stark Law has just turned eighteen years old. This legislation, informally named after its chief legislative sponsor, Representative Fortney “Pete” Stark (D-CA), was originally enacted as part of the Omnibus Budget Reconciliation Act of 1989, about eighteen years ago (with an effective date of January 1, 1992). The Stark Law, as amended, prohibits a physician from making referrals to an entity, with which the physician or an immediate family member has a financial relationship, for the furnishing of specified “designated health services” (“DHS”) under Medicare, unless an exception applies. The Stark Law, with its numerous sets of proposed and final regulations, has developed gradually, in stages and, like most eighteen-year olds, remains a work in progress.
The Centers for Medicare & Medicaid Services (“CMS”) bears primary responsibility for implementing the Stark Law. In so doing, CMS coordinates, to a significant degree, with the Department of Health and Human Services’ (“HHS”) Office of Inspector General (“OIG”). Past major regulatory Stark Law initiatives have appeared as stand-alone Stark regulations and/or proposed regulations. Consistent with that approach, on June 14, 2007, CMS announced that it has sent a final Stark rule (referred to informally as “Stark III”) to the Office of Management and Budget (“OMB”) for regulatory review. That rule likely will finalize a number of Stark Law provisions that have not yet been addressed (e.g., referrals for certain Medicaid-covered services) and also will address issues raised by the many public comments received on the Stark II (Phase II) regulations published in the Federal Register on March 26, 2004.
However, for the past two years, CMS also has opted to tackle certain tough Stark issues in another rulemaking context: the proposed update to the Medicare Physician Fee Schedule (“MPFS”). In certain cases, the Stark Law rules are intertwined with Medicare reimbursement rules and, thus, must be considered together to understand the permissibility of certain arrangements. Understanding the interplay of these complicated rules can be challenging but is essential for maintaining regulatory compliance.
On July 2, 2007, CMS posted on its website, as a proposed rule, the 2008 MPFS update, which includes several important and potentially far-reaching proposed amendments to current Stark regulations. This mechanism of using the MPFS for addressing important, complex Stark issues has added strength to the accelerating currents, and cross-currents, of change and development on the Stark Law front. Further, CMS is seeking public comment on several additional Stark-related topics for which no rule change is yet being formally proposed (but may well be reflected in later rule changes). Public comments to CMS on most of the proposed rules and related topics are due no later than August 31, 2007. Due to a publishing error, the deadline for commenting on CMS’s proposed “alternative criteria for satisfying exceptions” (discussed herein in Section II (K)) was extended to September 7, 2007.
Finally, there is growing evidence that federal audit activity of Stark Law compliance will increase in the hospital/physician relationship context. CMS recently announced in the Federal Register that the agency will seek mandatory disclosure from approximately 500 hospitals, located in approximately fifteen states, of hospital/physician financial relationships subject to the Stark Law. This mandatory reporting/disclosure initiative follows CMS’s prior attempt to obtain voluntary hospital compliance with a similar request for information focused primarily on specialty hospitals and their competitors. Disappointed with the number of hospitals that responded voluntarily, CMS will be requiring reporting of physician financial relationships from the selected hospitals, thereby turning up the heat by increasing its scrutiny of Stark issues involving physician-hospital financial relationships.
In our view, the important Stark-related developments described in this memorandum, together with the expected promulgation of the Stark III rule in the near future and the impending mandatory hospital reporting activity, are clear indications that Stark Law issues are increasingly “coming of age” and becoming more of a compliance priority for CMS and perhaps also for federal enforcement agencies. Entities subject to the Stark Law that could be affected by these developments should consider submitting comments to CMS. At the very least, such providers should continue to be vigilant in their Stark compliance efforts.
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