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FOR MANY REFERRALS By The Health Care Financing Administration recently issued the first part of its final rule on the "Stark" law, which generally prohibits physicians from referring patients for specific health services to entities in which the physician or a family member has a financial stake. The law specifically disallows physicians from making referrals to entities with which they or their family members have ownership, investment or other financial relationships. Among the health services in question are clinical laboratory services; physical, occupational and speech therapy services; radiology services; radiation therapy services and supplies; certain types of medical equipment; prosthetics, orthotics, and related devices and supplies; home health services; prescription drugs furnished in certain settings; and inpatient and outpatient hospital services. The relationships that might raise issues concerning the law potentially are limitless. For example, a physician's referral of a patient to a hospital could be problematic if the physician is paid by the hospital or pays the hospital for consulting services, office space, equipment or any other service. A physician who has a direct or indirect ownership interest in a health care provider such as a physical therapy office could violate Stark by referring patients to that provider. Even orders a physician makes that are carried out in his or her own office (such as an X-ray on a patient using the office's own X-ray machine) might violate the Stark law, depending on the circumstances. Violations of Stark might result in required refunds to Medicare or Medicaid, significant financial penalties and exclusion from participation in certain health care programs, including Medicare. Because the reach of Stark is so broad, the law itself contains specific exceptions that protect certain arrangements, which otherwise would be problematic. The interpretation of these exceptions, and the creation of new exceptions, has been delegated to the Health Care Financing Administration. The administration issued proposed regulations on the Stark law during 1998. Since then, health care providers have been waiting for final regulations that would provide guidance on what arrangements were acceptable under Stark. The first part of these final regulations was published last month. The second half is expected to be released soon. The final regulations make numerous changes to the Stark law as previously understood. For example, physicians or groups that rent certain pieces of equipment on a daily basis might not be able to continue doing so because the final regulations make such arrangements difficult, if not impossible, to maintain. Another example involves the potential for physicians to sell items such as crutches, canes and manual wheelchairs directly to their patients for a profit if specified requirements are met. Because the changes are so significant, the administration has delayed enforcement of the new regulations until Jan. 4, 2002. The only exception pertains to provisions of the rule concerning physician relationships with home health providers, which are effective now. Physicians, and entities that have relationships with physicians, therefore generally will have a "window of opportunity," until Jan. 4, 2002 to review their existing arrangements and to make any changes necessary to come into compliance. They also might wish to revisit potential arrangements they previously avoided to see if the Stark regulations regarding them have been relaxed. Health care providers must recognize that any previous analysis of Stark compliance should be revisited.
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