The Centers for Medicare and Medicaid Services (CMS) released the FY 2009 Inpatient Prospective Payment System Rule on July 31, 2008, which included significant changes to the Stark Law rules on physician self-referral. These rules will be published in the August 19, 2008 issue of the Federal Register.

The Stark Law (1) prohibits a physician from making referrals for “designated health services” (DHS) payable by Medicare to an entity with which he or she (or an immediate family member) has a financial relationship (ownership or compensation) unless an exception applies; and (2) prohibits the entity from filing claims with Medicare (or billing another individual, entity, or third party payer) for those DHS rendered as a result of a prohibited referral.

Key changes in these new Stark rules include (1) the expansion of the definition of DHS “entity”; (2) prohibition of percentage-based payments and per-click arrangements for space and equipment leases and (3) clarification of the concept of when a physician is deemed to “stand in the shoes” of his or her physician organization. Many legitimate business arrangements, including office space and equipment leases and physician ownership in joint ventures which provide services “under arrangements” with hospitals and other providers, have been entered into in compliance with and in reliance upon the exceptions provided in the Stark Law and rules. Under these new rules, many of these arrangements must be restructured.

Although certain provisions of the rules are effective October 1, 2008, the effective date is October 1, 2009, for the provisions which will require restructuring of current compliant arrangements, such as the change in the definition of DHS “entity” and revisions to the exceptions for space leases, equipment leases, fair market value compensation arrangements and indirect compensation arrangements to place limitations on the payment methodologies allowed under these exceptions.

The final rules are even broader than the key changes noted above. A brief summary of the rule changes can be found here.