Stark law changes effective October 1, 2008 – more changes to follow in 2009

Effective October 1, 2008, if a physician is an owner in a physician organization that has a financial relationship with an entity that bills Medicare for designated health services, the Stark law will now regulate that relationship directly. The principal impact of this change is that hospitals and health systems will need to meet the more rigid formalities of having a written contract for services established in advance and limiting the compensation to fair market value when contracting through a physician organization for physician services. 

CMS also finalized three changes that take effect next October so as to provide a long transition period. First, CMS will limit turnkey arrangements between hospitals and physicians whereby the physician group performs essentially all of the services relating to a service for which the hospital turns and bills Medicare. Hospitals can continue to lease equipment or obtain personnel and services from physician groups but the fine lines between the two will be established on a case-by-case basis. Also, leases between hospitals and physicians may need to be restructured before October, 2009. Certain types of rental payments to referring physicians based on a percent of revenue will be prohibited and, likewise, leases between a hospital and its referring physicians cannot have rental payments based on the number of procedures performed. In both cases, flat rate rental amounts will need to be established. 

The AMCNO is also expecting some additional changes that will go into effect on January 1, 2009, but CMS has not finalized those rules. The proposal would allow certain “gainsharing” arrangements whereby hospitals and physicians can financially align for hospital cost savings and quality improvement measures. We expect a final rule within the next month or two but as of now, the proposed rule has offers changes in terms of alignment strategies. More information on the rules will be provided in future emails and in the Northern Ohio Physician magazine.