Final Stark Phase III Regulations Issued by CMS
August 31st, 2007
The Centers for Medicare and Medicaid Services (CMS) posted August 27 the long-awaited Phase III final rule on the physician self-referral prohibition. The Stark Phase III final regulations are slated to be published in the September 5 Federal Register and will be effective 90 days after the date of publication.
According to the 516-page display copy posted by CMS, the final rule responds to comments on the March 26, 2006 Phase II interim final rule with comment period (69 Fed. Reg. 16054), which set forth the self-referral prohibition and applicable definitions, interpreted various statutory exceptions, and created additional regulatory exceptions for arrangements that do not pose a risk of program or patient abuse.
CMS said the Phase III final rule does not create any new exceptions and in general reduces “the regulatory burden on the health care industry through the interpretation of statutory exceptions and modification of the exceptions that were created using the Secretary’s discretionary authority…”
“We believe this final rule is consistent with the statute’s goals and directives, and protects our beneficiaries,” said CMS Acting Deputy Administrator Herb Kuhn in a press release.
With respect to indirect compensation arrangements, CMS explains in the final rule that the relationship between the physician and his or her physician organization is disregarded and the physician “stands in the shoes” of his or her physician organization.
As a result, “many arrangements that would have constituted indirect compensation arrangements if analyzed under Phase I and Phase II are now deemed to be direct compensation arrangements, and the indirect compensation arrangements exception cannot be used,” the final rule says.
Moreover, under the Phase III final rule, “many arrangements that may not have met the definition of an ‘indirect compensation arrangement’ under the Phase I and Phase II analysis will constitute direct compensation arrangements that must satisfy the requirements of an exception in order for the physician to make DHS referrals to the entity furnishing DHS.”
CMS adds that the “stand in the shoes” provisions are applicable as of the effective date of this Phase III final rule, but that existing arrangements need not be amended during the original or current renewal term of the contract to comply with the Phase III final regulations.
CMS says deeming more arrangements to be direct compensation arrangements “will reduce the risk of fraud and abuse by closing an unintended loophole in the definition of ‘indirect compensation arrangement’” and “will ease compliance by simplifying the analysis of many arrangements.”
The final rule also eliminates the safe harbor within the definition of fair market value, recognizing concerns about the availability of the surveys identified in the safe harbor. CMS goes on to emphasize, however, that it will continue to scrutinize fair market value as it is an essential element of many exceptions.
According to CMS, the final rule also expands the regulations regarding physician recruitment and retention payments to permit recruitment of more physicians into extended areas when needed.
The final rule also provides relief for inadvertent violations of the self-referral prohibition, CMS says. Under the rule, parties that inadvertently exceed the limit on non-monetary compensation by no more than 50% may continue to satisfy the requirements of the exception if the amount is repaid within 180 days of its receipt or the end of the calendar year, whichever is earlier.
Entry Filed under: News