As is likely no surprise by now, the Health Care Financing Administration ("HCFA") again missed its promised publication date for the physician self-referral law ("Stark II") final regulations.

When last we heard, Joanne Sinsheimer, the lead HCFA staff person responsible for the final Stark II regulations, anticipated that the regulations would be published by the end of the summer. HCFA missed that target publication date. Now, Ms. Sinsheimer has declined to speculate on a publication date and will only state that the final regulations should be published by the end of the year.

Drafts of the regulations reportedly have been sent to the Office of Management and Budget ("OMB") for review. We understand that OMB returned the drafts to HCFA for further revision. Accordingly, the anticipated date for publication of the final Stark II regulations remains a mystery. We speculate that the White House is not anxious to publish regulations during the Presidential campaign.

On the legislative front, Congressman William Thomas, Chairman of the House Ways and Means Health Subcommittee, continues to push for passage of his bill which would amend the Stark II law, among other things, to exclude compensation arrangements from regulation. Congressman Pete Stark has opposed Thomas' bill stating that it would dilute the restraints the law has placed on over-utilization of services.

Congressman Stark released letters from the Department of Justice ("DOJ") and the Department of Health and Human Services Office of the Inspector General ("OIG") contesting passage of Thomas' bill. Both agencies discuss the importance of the Stark II law and conclude that any alteration of the law will significantly undermine current investigations and spur over-utilization. More specifically, DOJ indicates that it "currently has over 50 matters under investigation or in litigation in which whistleblowers have alleged misconduct that could violate [Stark II]." DOJ states that the majority of their investigations "concern sham compensation relationships with hospitals and other institutional providers - relationships in which physicians appear to receive money for no work, property for which the hospital has no use, or some other cover - when the evidence shows a purpose of the relationship is to induce or ensure referrals."

Fifty pending investigations is a low number and the statement by the DOJ suggests that one purpose behind all the "sham relationships" was to induce referrals. A compensation relationship, one purpose of which is to induce referrals, may be impermissible under the anti-kickback statute. Therefore, amending Stark II to exclude compensation arrangements may not render these "sham relationships" the DOJ is currently investigating, outside the reach of the law. But, of course, it would make them far easier to prosecute by eliminating any need for the government to prove a "knowing and willful" violation.

Both agencies, however, argue that the anti-kickback statute alone is insufficient to control compensation arrangements because intent to induce referrals is difficult to prove. In addition, the agencies conclude that the removal of compensation arrangements from the reach of Stark II will result in schemes to circumvent the law.

Therefore, it remains uncertain whether Thomas' bill to amend the Stark II law will pass this year or when we will see the publication of the final Stark II regulations. We will keep you informed of any developments.

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For additional information contact, Wesley E. Harrington, CAE, Executive Director of ALS at:
American Lithotripsy Society, 305 Second Avenue, Suite 200
Waltham, Massachusetts 02451
Telephone: (781) 895-9098
Fax: (781) 895-9088


American Lithotripsy Society
305 Second Avenue, Suite 200
Waltham, Massachusetts 02451
Telephone: (781) 895-9098
Fax: (781) 895-9088

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