Interim final rule on Stark Law issued

July 1, 2004



The Centers for Medicare & Medicaid Services has issued the second phase of its interim final regulations designed to provide guidance on laws that ban physician self-referral. These new regulations are meant to clear up issues arising from the laws' implementation and will take effect July 26.

Under the so-called Stark law, physicians are prohibited from referring Medicare or Medicaid patients for certain designated health services to facilities in which they have a direct or indirect financial interest. The new regulations clarify the types of compensation arrangements physicians can enter into, and for the first time discussed exceptions addressing technology or services provided to enable physicians to participate in community health-information systems, reported Modern Healthcare (3/29/04).

Specifically, the updates allow some percentage compensation arrangements, which are set in advance and do not change based on the volume or value of referrals. CMS also clarified that all physicians can be paid bonuses based on the work they perform, but not on referrals for ancillary services. Hourly payments to physicians are also allowed as long as they are based on fair market value, a key requirement for most compensation arrangement exceptions.

To encourage the use of electronic health records, CMS has created an exception that allows a facility to provide a physician with certain information technology in order to participate in a community-wide health information system. The catch: The arrangement between facility and physician must not take into account the volume or value of referrals or violate the anti-kickback statute or other federal or state law governing billing or claims submissions.

Finally, while entities that provide designated health services are required to disclose information about financial relationships with physicians, the new regulations specify that such reporting is only required upon request.