Hospitals and Physicians should analyze the impact of Stark II

The Stark II Phase II regulations were published as an interim final rule on March 26, 2004 and will become effective on July 26, 2004. 

 

The Stark law (aka federal physician self-referral law) prohibits physicians from referring Medicare patients for certain designated health services (DHS) to an entity with which the physician or a member of the physician's immediate family has a financial relationship--unless an exception applies. Stark was originally enacted under Section 1877 of the Social Security Act  in 1989 and only applied to physician referrals for clinical laboratory services. In 1993 and 1994, Congress expanded the prohibition to ten additional DHS and applied certain aspects of the law to the Medicaid program. The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA 2003) (Public Law 108-173) further altered section 1877 by establishing an 18-month moratorium on physician ownership of or investment in certain specialty hospitals. The moratorium is in effect from December 8, 2003 through June 7, 2005. The Stark law is typically used in conjunction with the anti-kickback laws to investigate health care providers for reimbursement related actions under Medicare and Medicaid. In addition, Stark is being used more and more as a basis for qui tam related whistleblower actions brought by individuals. 

 

The new regulations clarify a number of areas of Stark law that have been confusing and uncertain for years. Health lawyers have tried to provide the best advice possible to their clients when looking at Stark related issued -- but because final regulations have been long in coming it has been very difficult to fully understand the complexity of some of the Stark related exceptions. Now that Stark II Phase I and Phase II have been issued many of the gray areas are now much clearer. What will this lead to? More enforcement? More qui tam whistleblower claims which contain Stark related allegations? Only time will tell. Hospital, physicians and other designated health service care providers should take a close look at the impact of the new regulations.