Resource file content and analysis

¶ … Stark II rules, physicians are presumed to have "financial relationships" by virtue of any direct rather than indirect compensation arrangement with any clinic, hospital, or other entity furnishing or delivering healthcare services that are within the Stark designation. In principle, the applicability of Stark prohibitions to the entities detailed depend substantially on whether there is an intervening entity between the physician and the facility or entity in which he owns a financial interest. In that regard, the owning physician is deemed to "stand in the shoes" of the healthcare entity in that the payment or compensation format of one is presumptively and automatically, ipso facto, imputed to the other.

The Modern Evolution of Stark II and Applicability to Hospitals and Physicians

Previous version of Stark rules excepted various indirect compensation mechanisms, such as where the physician was technically employed by a clinic or other facility that was, in turn, owned by the hospital in which the physician held a proprietary or financial interest. In practice, this distinction was determined by the Centers for Medicare and Medicaid (CMS) to result in routine abuses and circumvention of the very types of relationships that Stark was enacted to address. The Centers for Medicare and Medicaid determined that this distinction had been exploited widely by physicians seeking to artificially introduce intermediaries to circumvent the applicability of the self-referral rules. The changes implemented by CMS in that regard deem physicians to be in the same position as the clinic or treating entity. Therefore, with respect to the listed institutions, the applicability of Stark would depend on the respective positions of the physicians and the facilities beneath any veil of contrived or merely nominal distinction between them.

The Safe Harbor Provision and the Effect of Competition on Costs

Similarly, CMS also addressed the safe harbor element of previous Stark II applicability which would also apply to the listed institutions on a case-by-case basis. Specifically, whereas previous versions of Stark provided for a determination of the fair market value of physician's services, the updated version does away with that safe harbor provision, instead requiring an independent, objective, (i.e. fair market) calculation of appropriate physician compensation. Meanwhile, CMS acknowledged that complications in the feasibility of accurately calculating the monetary value of physician's services support the allowance of commercially reasonable methods of determining fair compensation in the modern era of medicine. Physicians and surgical hospitals argue that the availability of their services actually increase patient choice while reducing costs and that excessive limitation of the freedoms of physicians under the strict Stark rules actually has the opposite effect and actually increases costs by limiting competition.