The Centers for Medicare and Medicaid Services has issued a one-year reprieve for a key provision of the so-called Stark I regulations, a move that will allow physicians in some referral arrangements to continue to receive compensation based on a percentage of their revenue or collections.
The regulations implement a law that took effect in 1992 barring physicians from referring patients to clinical laboratories in which they have an ownership interest. A subsequent law in 1995, known as Stark II, expanded that prohibition to other types of healthcare facilities and services.
Under the Stark I provision, previously scheduled for implementation Jan. 4, a physician with a financial relationship to an organization providing certain healthcare services could not refer patients to the organization unless the financial relationship qualified for an exception, including the requirement that compensation to the physician be set in advance.
The requirement barred payments based on "fluctuating or indeterminate measures," such as a percentage of a physician's or group practice's revenue or collections. Such arrangements are fairly common, and the CMS restriction would have forced scores of hospitals and medical centers to renegotiate any contracts that were based on a percentage of billings or collections.
A new interim final regulation, to be published Dec. 3 in the Federal Register, will delay the restriction for a year. In the text of the regulation, HHS and the CMS said the delay would give "officials the opportunity to reconsider the definition of compensation that is `set in advance' as it relates to percentage compensation methodologies in order to avoid unnecessarily disrupting existing contractual arrangements for physician services."
HHS said many comments received on the exception indicated that physicians are "commonly paid" based on a formula that includes revenue billed or collected. The compensation methodology is "frequently used by hospitals, physician group practices, academic medical centers and medical foundations," the agency said.
"We are concerned that the disruption (resulting from the restrictions) could unnecessarily inconvenience Medicare beneficiaries or interfere with their medical care and treatment," HHS said in the summary of the regulation.
As a result of the interim rule, providers scrambling to restructure compensation arrangements in anticipation of the new law will have at least one more year to deal with the issue, said Linda Baumann, a partner in the law firm Reed Smith Shaw & McClay, Washington. "I think (the CMS) felt it was very important to make this change-they wanted to get it out there because they were afraid of the impact," she said. "This gives us breathing room."