CMS issues Phase III final rule on physician self-referral

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The U.S. Centers for Medicare and Medicaid Services (CMS) has issued final regulations prohibiting physicians from referring Medicare patients for certain items, services and tests provided by businesses in which they or their immediate family members have a financial interest.

The regulation is the third phase of the final regulations implementing the physician self-referral prohibition commonly referred to as the Stark law, CMS said.

The third phase of rulemaking (Phase III) responds to public comments on the Phase II interim final rule published March 26, 2004 in the Federal Register. CMS officials said the rule does not establish any new exceptions to the self-referral prohibition, but rather makes certain refinements that could permit or, in some cases, require restructuring of some existing arrangements.

Based on public comments on the Phase II rule, the final regulation includes the following actions, according to CMS:

  • Provides enhanced flexibility in structuring non-abusive compensation arrangements. The agency said the final rules regarding physician recruitment and retention payments have been expanded to permit recruitment of more physicians into extended areas when needed.
  • Provides relief for inadvertent violations of the self-referral prohibition under certain circumstances. CMS said the Phase III final rules permit parties that inadvertently exceed the limit on non-monetary compensation to continue to satisfy the requirements of the exception if the excess non-monetary compensation did not exceed 50 percent of the permitted amount and is repaid within 180 days of its receipt or the end of the calendar year, whichever is earlier.
  • Reduces the regulatory burden for compliance with certain exceptions. The Phase III final rule eliminates the requirement that entities providing professional courtesy provide written notice to an insurer of a reduction of any coinsurance obligation, the agency said.
  • Clarifies the agency’s interpretation of existing regulations. CMS said the final rule clarifies which provisions in office space and equipment lease agreements may be amended during the initial and subsequent terms of the agreements.

The final rule, which was put on display today, will be published in the Sept. 5, 2007 Federal Register. More information about the Phase III final rule is available via the CMS website at: