Our last newsletter detailed significant Stark Law changes and it appears the Center for Medicare and Medicaid Services ("CMS") is not done yet.  On April 14, 2008 CMS proposed more changes to Stark (the full text of the propsoals can be found at the following site on pages 577-621). 

http://www.cms.hhs.gov/AcuteInpatientPPS/downloads/CMS-1390-P.pdf. 

None of these proposals are in effect.  CMS currently is soliciting comments on whether these changes should be adopted.  If you would like to comment on a proposed change, please contact us.  We can provide you with more detailed information on each proposal, as well as guide you through the comment process. 

1.   Stand in the Shoes.  As noted in our prior newsletter, CMS adopted a provision whereby physicians would “stand in the shoes” of their physician organizations.  CMS also proposed a similar rule under which a healthcare entity would “stand in the shoes” of any entity it owns or controls.  Both of these provisions may turn an otherwise “indirect” financial relationship into a “direct” financial relationship, altering the type of Stark referral exceptions available to comply with the regulation.  CMS is now proposing revisions to both these “stand in the shoes” provisions, as follows:  

• Physicians would not be deemed to stand in the shoes of their physician organization if the compensation arrangement is between the physician organization and the physician satisfies one of these Stark exceptions: employment relationship; personal service or fair market value compensation.  Physician owners and investors, however, will still stand in the shoes of their physician organizations.
• CMS is seeking comments on whether physician owners should stand in the shoes of their physician organization when their interest is nominal and their compensation arrangement with the physician organization satisfies the Stark exceptions for personal services, employment relationships or fair market value compensation.
• CMS is seeking comments on whether meeting other Stark exceptions should prohibit application of the stand in the shoes provision.
• CMS is seeking comments on ways in which it can ensure that the full range of potentially abusive arrangements between DHS entities and physician organizations are appropriately addressed in situations where physicians do not stand in the shoes of their physician organizations.
• An entity providing DHS would stand in the shoes only of an organization in which it has 100% ownership interest.
• CMS is seeking comments on whether it should consider a DHS entity to stand in the shoes of an organization in which the DHS entity holds less than 100% interest.
• CMS is seeking comments on whether it should consider a DHS entity to stand in the shoes of an organization in which it controls, as well as how to define “control.”
• The definitions of “physician” and “physician organization” would be changed to clarify that a physician and a professional corporation of which he or she is a sole owner will always be treated as “one” for the purpose of applying any Stark regulations. 

2.   Period of Disallowance.  CMS is proposing to define the period of time, after violating Stark, when physicians will be disallowed from referring patients for DHS payable under a federal healthcare program (the “Period of Disallowance” or “POD”).  The proposals are as follows: 

3.   Gain Sharing.  Gain sharing typically refers to an arrangement under which a hospital gives physicians a share of the reduction in the hospital’s costs (that is, the hospital’s cost savings) attributable in part to the physician’s efforts.  Gain sharing arrangements implicate Stark if physicians make referrals to a hospital with which they have a gain sharing agreement.  CMS is soliciting comments on the following issues related to gain sharing: (1) whether certain gain sharing services or arrangements should be disallowed under Stark; (2) should there be a gain sharing exception to Stark; and (3) what types of safeguards should be in place to ensure gain sharing arrangements are not abusive.  

4.  Physician Owned Implant/Medical Device Companies.  CMS recognizes that the number of physician investors in implant/medical device companies has increased.  It is concerned that these physician-investors are in a position to benefit financially from referrals to hospitals that, in turn, purchase products manufactured or distributed by a company in which the physician has an interest.  Although CMS made no specific proposal at this time, it is soliciting comments on the following issues:  (1) should Stark specifically address the issue of physician ownership in implant/medical device companies, or are current Stark regulations related to indirect ownership sufficient to analyze the problem; (2) is it more proper to address those issues via the Federal Anti-Kickback Statue or Federal False Claims Statute; (3) to what degree are these arrangements potentially abusive; and (4) what actions can CMS take to cure any perceived problems with these types of ownership arrangements