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Long-Awaited Stark Law Phase III Final Rule Released By CMS

Aug.28.2007

On August 27, 2007, CMS released the final rule that constitutes the third phase (“Phase III”) of the long, drawn out rulemaking process relating to the Federal physician self-referral prohibition (the “Stark Law”). See http://www.cms.hhs.gov/PhysicianSelfReferral/Downloads/CMS-1810-F.pdf. Phase III is scheduled for publication in the Federal Register on September 5, 2007, which would allow the rules to take effect on December 4, 2007. Although Phase III contains many technical changes and nuanced details, it also includes significant and substantive changes that will cause health care organizations, physicians, and their counsel to scramble to reevaluate and restructure longstanding relationships before the end of the year is out.

All existing hospital and physician group practice arrangements must be revisited and likely restructured before the current terms of the arrangements expire; scheduled amendments to space leases, equipment leases, and personal service arrangements must be reviewed for compliance (and likely scrapped); and group practices must reconsider and perhaps revise the manner in which they share profits with and distribute productivity bonuses to group physicians.

Phase III is a final rule wholly separate from the self-referral provisions contained in the recent, Proposed CY 2008 Medicare Physician Fee Schedule (the “Fee Schedule Rule”). See http://www.crowell.com/NewsEvents/Newsletter.aspx?id=477. In fact, certain Phase III requirements significantly differ and sometimes directly conflict with the Fee Schedule Rule, adding confusion and frustration as providers attempt to comply with a declaredly “strict liability” statute. In addition, Phase III commentary reveals that CMS may be considering yet another future rulemaking to address further issues raised by stakeholders.

Please click here for a brief summary and analysis of some of Phase III’s more important requirements.

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