The new Stark rules affecting “under arrangement” transactions, “per-click” leases and percentage-based leases are scheduled to take effect on October 1, 2009. Absent a successful court challenge, which seems unlikely, providers involved in arrangements affected by the new rules will have to terminate or restructure their arrangements to comply. There is no grandfathering of existing arrangements. The new rules are briefly summarized below.
“Under Arrangement” Transactions. The new rules virtually eliminate the ability of a hospital to purchase services “under arrangement” from a supplier that is owned in whole or in part by physicians who refer patients to the supplier for services that are billed by the hospital to Medicare. Under the new rules, the definition of “entities” that are subject to Stark is expanded to include the supplier that performs the services that are billed as “designated health services” (DHS) as well as the entity that bills Medicare for the DHS. Under this change, the physician-owners are deemed to have direct ownership interests in the supplier, and referrals by the physician-owners to the supplier are considered referrals of DHS (i.e., hospital services). Unless the supplier qualifies as a rural provider, there is no Stark exception that permits such ownership interests.
“Per-Click” Leases. Under the new rules, per-unit lease payments (so-called “per-click” leases) will be prohibited to the extent that the rental charge reflects services provided to patients referred by the lessor to the lessee. This restriction will apply to both equipment and office space leases.
Percentage-Based Compensation. The new rules will prohibit percentage-based compensation formulas to determine office or equipment rent. Because the new rules apply only to office or equipment leases at this time, payments based on a percentage of charges or collections will still be permitted in professional and non-professional services contracts, such as contracts for clinical, management and/or billing services, assuming the arrangement satisfies a Stark exception.