CMS today issued final regulations prohibiting physicians from referring Medicare patients for certain items, services and tests provided by businesses in which they or their immediate family members have a financial interest.

            This regulation is the third phase of the final regulations implementing the physician self-referral prohibition commonly referred to as the Stark law.

            “These rules protect beneficiaries from receiving services they may not need and the Medicare program from paying potentially unnecessary costs,” said Herb Kuhn, CMS acting deputy administrator.

            This third phase of rulemaking (Phase III) responds to public comments on the Phase II interim final rule published March 26, 2004 in the Federal Register.  The rule does not establish any new exceptions to the self-referral prohibition, but rather makes certain refinements that could permit or, in some cases, require restructuring of some existing arrangements, CMS officials explained.

            “We believe this final rule is consistent with the statute’s goals and directives, and protects our beneficiaries,” Kuhn said.

            Based on public comments on the Phase II rule, this final regulation includes the following actions:

• Provides enhanced flexibility in structuring non-abusive compensation arrangements.  For example, the rules regarding physician recruitment and retention payments are expanded to permit recruitment of more physicians into extended areas when needed. 
• Provides relief for inadvertent violations of the self-referral prohibition under certain circumstances.  For example, the rules permit parties that inadvertently exceed the limit on non-monetary compensation to continue to satisfy the requirements of the exception if the excess non-monetary compensation did not exceed 50 percent of the permitted amount and is repaid within 180 days of its receipt or the end of the calendar year, whichever is earlier.
• Reduces the regulatory burden for compliance with certain exceptions.  For example, the Phase III final rule eliminates the requirement that entities providing professional courtesy provide written notice to an insurer of a reduction of any coinsurance obligation.
• Clarifies the agency’s interpretation of existing regulations.  For example, the rule clarifies which provisions in office space and equipment lease agreements may be amended during the initial and subsequent terms of the agreements.

            “As guardians of the Medicare program, we must be mindful of the potential impact that physician conflicts of interest can have on the Medicare program and its beneficiaries,” Kuhn said. “The rule we released today strikes the proper balance between protecting patients and the program, and providing needed flexibility to health care entities to ensure the provision of quality care to our beneficiaries without unnecessarily impeding non‑abusive arrangements.”

            The final rule, which was put on display today, will be published in the September 5, 2007 Federal Register.  For more information, visit the CMS Web site at: http://www.cms.hhs.gov/PhysicianSelfReferral/

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