Stark II self-referral rules and hospital physician compensation

¶ … 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.

Physician Recruitment

The listed institutions would also be impacted by Stark rules pertaining to physician recruitment. Specifically, physicians must comply with requirements to relocate their practices to the same geographic area as the hospital's area of service in relation to the percentage of patients drawn from that region. The applicability of Stark in this regard is also highly case-specific, such as in connection with exceptions for physicians who relocate to assume a practice vacated by physicians who retire or die.