More Stark III analysis for Scott Becker

There are nine issues to worry about in CMS’s recently published proposed rule and call for comments on the Stark Law. These proposed Stark III Rules would to tighten up restrictions rather than add opportunities. While many of the proposed changes make sense given ongoing potentially abusive activities, the changes wouldn’t exactly be described as physician-friendly.

In addition to the proposed restrictions on per-click leases and the probable elimination of under-arrangements ventures, CMS touched on several more key issue. Here’s a quick look at a few more of them, derived from a new white paper entitled “Stark III — Nine Areas of Concern.”

In-office ancillary services. The commentators expressed concern with the use of the “centralized building” requirement under the in-office ancillary services exception to the Stark Act. Generally, physicians can provide designated health services through their practices at either a location where they regularly practice (as defined more fully in the Stark regulations) or at a centralized building location. CMS raised concerns that many physician groups are using centralized building locations to meet the in-office ancillary services exception, but really have almost no resources there. That is, the group simply outsources the various components of the testing to contractors who have virtually no relationship to the group practice.

In previous pronouncements, CMS has contemplated several methods of tightening up the in-office ancillary services exception, such as requiring a minimum size centralized building; that all or substantially all of the equipment needed to perform the ancillary services is permanently located in the centralized building space; and that a group have a full time employee or substantially full time presence at the centralized building.

CMS is now requesting In opinions regarding several additional suggestions designed to curb abuse under the in-office ancillary services exception: whether certain services prone to abuse by outsourcing, such as complex laboratory services, should lose protection of the in-office ancillary services exception; whether CMS should adopt changes to the definition of “centralized building,” such as those changes suggested above; whether the protection of the in-office ancillary services exception should apply to non-specialists who refer for specialist services using equipment that is owned by the non-specialists.

Burden of proof. The new rules propose that the burden of proof showing that a physician meets a Stark Act exception fall on the physician or the party ordering or billing for the designated health services, and not on the government. This proposed rule clarifies that it is not CMS’s responsibility to prove that a provider has violated the Stark Act prohibitions. Rather, a provider bears the burden of proof in showing that an exception is met or that a particular arrangement does not implicate a designated health service.



Obstetrical malpractice insurance subsidy. CMS has already provided an exception for a subsidy for a physicians’ obstetrical malpractice insurance coverage. CMS has not proposed any rules to revise or eliminate this exception, however it is soliciting opinions as to whether certain elements should be added in order to provide more stringent requirements to meet this exception. These elements include the necessity of a written agreement, physician certification that a certain percentage of patients reside in a medically underserved area, and the requirement that the subsidy not be based on referrals from the physician or vary due to the volume or value of referrals from the physician. In general, these new requirements would make it more difficult to meet the exception required to provide a subsidy for obstetrical malpractice insurance coverage.

If you’d like to get the white paper, you can download a pdf here.

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