The CMS issued interim final regulations creating new exemptions to the ban on physician self-referral, offering guidance to providers who had been waiting years for them.
Providers and healthcare lobbyists who were still wading through the nearly 600-page document expressed relief at the regulations, which also clarified existing "safe harbors" for physician investments and compensation arrangements. The self-referral regulations were published in the March 26 Federal Register, and after a 90-day comment period they are set to take effect July 24. They follow up on the agency's 2001 finalization of the so-called Stark laws, named after their chief proponent, Rep. Pete Stark (D-Calif.).
The laws ban physician referrals to certain types of clinical facilities in which the doctors have financial interests. As part of its update to the self-referral laws, the CMS elaborated on the types of compensation arrangements hospitals can legally offer physicians and for the first time included technology or services provided to enable physician participation in community health-information systems. The CMS also eliminated a proposed restriction on productivity-based bonuses for physician employees, but it said such bonuses must be based on physicians' personal productivity and not their referrals for ancillary services.
"At this point, the field has been waiting for guidance to come," said Maureen Mudron, the Washington counsel for the American Hospital Association. "It will be very helpful to have final guidance."
The update also reflects an 18-month moratorium on physician investment in new specialty hospitals included in the 2003 Medicare reform law (See related story, p. 10).
While the Stark laws were first passed more than a decade ago, the first set of regulations detailing what is and isn't allowed was published in 1995 and applied to physician referrals to clinical laboratory services. A second set of regulations was published in 1998 and applied to all health services. Last week's guidance, as well as guidance issued in 2001, aims to clear up lingering confusion about the earlier regulations.
"The essential problem is that it is much harder than anyone anticipated to separate the routine relationships from the prohibited ones," said Edward Kornreich, a healthcare lawyer at the New York firm of Proskauer Rose. For example, he said, if a physician tells a patient to return for a checkup in a month, that is a self-referral that is allowed. But referring a patient to an MRI center in which the doctor may have an ownership stake may be prohibited.
"If we said all self-referrals should be prohibited, all medicine would stop," Kornreich said.
In the meantime, lawyers said, the CMS has been forced into a position in which it could not enforce the regulations.
"In areas of ambiguity ... without definitive guidance, the regulators have had to recognize it would have an uphill battle arguing that providers knowingly were in violation," said David Matyas, a partner in the Washington law firm of Epstein, Becker & Green.