Earlier this week the Congress passed the Patient Protection and Affordable Healthcare Act, otherwise known as Health Reform.  Included in the Act were instructions to CMS to make changes to the regulations implementing the Stark Self-Referral Act (the “Stark Law”).  These changes will have a direct effect on the financial relationships between physicians and DHS entities such as hospitals. 

 General Overview of the Stark Law

Unless an exception applies, the Stark Law, 42 U.S.C. § 1395nn, prohibits a physician from making a referral to an entity for the furnishing of designated health services (“DHS”) that would otherwise be covered by Medicare if the physician (or an immediate family member) has a financial relationship with the entity.  Further, entities may not submit a claim or bill any payor for DHS furnished pursuant to a prohibited referral.  State Medicaid programs may not receive federal funds for DHS rendered pursuant to referrals that would be prohibited if the services had been covered by Medicare. 

The exceptions are organized into three categories: (i) exceptions for certain services (known as the general exceptions); (ii) exceptions for certain ownership and investment interests; and (iii) exceptions for certain compensation arrangements.  The exceptions typically require contracts between the parties which set out, among other provisions, that any compensation paid between the parties does not take into account the volume or value of referrals or any other business generated between the parties, is based on fair market value, is set in advance, is in writing, and is for at least a one-year term.

New Changes

Section 6409 – Medicare Self-Referral Disclosure Protocol

This section requires that HHS implement a disclosure protocol for actual and potential Stark law violations. This protocol, termed the self-referral disclosure protocol (“SRDP”) must be developed within six months and the instructions must be posted on the CMS website.  The SRDP instructions shall include the name of the specific person or office to whom the disclosures should be made and the implication of the SRDP on any corporate integrity agreements and corporate compliance agreements. 

Importantly, HHS is authorized to reduce the amount due for any violations under the Stark Law.  In evaluating whether to reduce the amounts owed, HHS may consider the following factors:

1)      Nature and extent of the improper or illegal practice;

2)      Timeliness of self-disclosure;

3)      The cooperation in providing additional information; and

4)      Such other factors as HHS deems appropriate. 

HHS is also required to submit a report to Congress on the implementation of the SRDP which shall include the number of providers making disclosures, the amounts collected, the types of violations reported, and such other necessary information to evaluate the impact of the SRDP. 

Section 6001 – Limitation on Medicare Exception to the Prohibition on Certain Physician Referrals for Hospitals

Section 6001 modifies the Stark Law exception that allows physicians to hold an ownership interest in hospitals.  This detailed section limits the expansion of physician owned hospitals, increases disclosure requirements related to physician ownership and provider agreements (including the names of the physicians and the extent of the ownership interest) to patients, on the hospital website, hospital advertising, and in annual statements to HHS, and expands requirements regarding physician ownership in the hospitals. 

Section 6003 – Disclosure Requirements for In-Office Ancillary Services Exception to the Prohibition on Physician Self-Referral for Certain Imaging Services

This section amends the in-office ancillary services exception by requiring a physician making a referral for MRI, CT or PET services (or other services designated by HHS) to inform the patient in writing, at the time of the referral, that these services may be obtained from a person or entity other than the referring physician, a physician within the group practice, or an individual directly supervised by that physician or a physician in the group practice.  In addition, the physician must provide the patient with a list of providers who furnish these services in the area in which the patient resides.  The effective date of the amendment if for services furnished on or after January 1, 2010 (unclear how this applies retroactively).

For more information about Stark or if you have questions please contact Don Black.