Running head: THE STARK LAW The Stark Law Grand Canyon University HLT 418 May 7, 2009 Abstract In this paper we will define what the Stark law is, its purpose and benefit to the health care industry and some major points of how it has evolved over the years. The Stark law was originally enacted in order to prevent physicians or physician groups from abusing their self-referral programs. Since its conception, it has evolved into three separate provisions which will be discussed in detail later on. Finally, we will give a couple of examples of how the Stark law has affected some of the local physician groups and hospitals in my area.

The Stark Law is the bill I have selected to discuss. In this paper I will define the Stark Law, examine the reason it came to being, and outline why it is a necessary bill for the overall well-being of the health care industry. I will also discuss some of the revisions made to the Stark Law, and, in addition, I will touch on some of its benefits, as well as give some of the arguments from those who oppose its restrictions. Finally, I will relate a recent personal experience where I have seen recent provisions to the law change the way my hospital and some of its physician groups operate.

The Stark Law is a complex bill that was passed through congress in 1989. It was named after the United States Congressman Pete Stark, who was the original sponsor of the bill. The Stark Law is found in section 1877 of the Social Security Act. Although there have been several provisions since its birth, the Stark Law was initiated in order to prohibit a physician from making self-referrals for certain designated health services which are payable by Medicare or Medicaid to an entity with which the physician (or immediate family member of the physician) has a financial relationship with, (website, CMS. ov). Physician self-referral is the best defined according to Starklaw. org as, “the practice of a physician referring a patient to a medical facility in which he has a financial interest, be it ownership, investment, or a structured compensation arrangement. ” (website, starklaw. org). The concern of physicians self-referring to themselves or immediate family members is that they would be more likely to order unnecessary exams such as labs, x-rays, MRIs or other medical tests that would “pad their pockets”. Since its conception, the Stark Law has had three separate provisions over a two decade period.

These provisions are known as Stark I, II, and III. Stark I was instilled as an exception to the Omnibus Budget Reconciliation Act of 1989 (OBRA 1989) which barred self referrals for clinical laboratory services under the Medicare program, (website, starklaw. org). Stark II was established in 1993 when congress decided to broaden the Stark Law to also include self referrals to a wide range of “designated health services” (DHS). According to AIShealth. com, DHS is defined as the following: a. General Principles b.

General Comment: Professional Services as DHS c. Clinical Laboratory Services d. Physical Therapy Services e. Occupational Therapy Services f. Radiology and Certain Other Imaging Services g. Radiation Therapy h. Durable Medical Equipment (DME) i. Parenteral and Enteral Nutrients, Equipment, and Supplies Due to the fact that this new provision was very restrictive, causing some physician practices to rethink the way they did business, the HHS decided to roll out the Stark II in two phases to which allowed those affected plenty of time to adjust to the new law.

Even though is was a more restrictive change, it is important to note that under Stark II, only the hospital was considered to be an entity furnishing designated health services; therefore, the Stark law did not prohibit the individual physicians from making referrals to hospital labs or imaging centers in which they had a financial interest. The main change with Stark III is that a final rule will go into effect that provides “[a] person or entity is considered to be furnishing designated health services if it is the person or entity that has performed ervices that are billed as designated health services” or it “is the person or entity that has presented a claim to Medicare for the designated health services. ” For example, under this new interpretation of the Stark law, both the hospital and a catheterization lab where physicians have a financial interest will be considered to be entities furnishing designated health services. Consequently, the Stark Law prohibits the individual physicians from referring patients to laboratories in which they have financial interests, (website, healthcenter. na. com). There are several arguments against the new changes to the Stark Law. One particularly interesting case I found was a recent lawsuit brought forth by a group of physicians. A group of cardiologists who owned and operated cardiac catheterization labs brought this action to challenge the new rules, saying that the change effectively would put the cardiac catheterization labs out of business because it would cause Medicare business generated through contracts with local hospitals to dry up.

Although the case was dismissed because the district court did not feel they had jurisdiction over the case, several arguments were presented against Stark III. The main argument was that the Stark Law will end hospital-physician cooperation. One of the plaintiffs in the case, Dr. Dennis J. Battock, a cardiologist and medical director and one of the founding physicians of Colorado Heart Institute, sums up the main argument perfectly. He said, “We are particularly disappointed that the court decided the case without looking at the merits of our arguments.

The Colorado Heart Institute has been operating under an agreement with its local hospital without interruption since 1987, and there has never been a hint of abuse by the physician owners. We still are struggling to understand why [the Centers for Medicare & Medicaid Services] wants to shut down this model of hospital-physician cooperation that should be the center-piece of health care reform. ” (website, healthcenter. bna. com). In the facility where I work I have seen another example of how the current definitions in Stark III have changed the ownership of a CT scanner.

The facility in which I work is a 400 bed hospital with a decent sized campus that includes many doctors’ offices, a surgery center, an imaging center, and a hospice. A few years ago, the cardiology and radiology Physician’s group that contract their services to the hospital partnered together with the hospital and purchased a 64-slice CT scanner which was placed in the hospital’s heart center. They anticipated a good amount of business for both the cardiologists (reading calcium scoring studies), as well as the radiologists (reading anything other than cardiac).

According to the Stark II provisions this was considered a legal partnership and a win-win situation for everyone involved. Due to the current interpretation under Stark III, as well as an unanticipated low volume of business on that particular machine, after consulting with their lawyers, the parties involved decided it would be wise to sell the CT scanner to the hospital and let the medical imaging department run it as one of their own. Although I do not know every detail in this particular situation, it does seem like it would be violating some regulations of the Stark Law if the Physician group were to retain the CT scanner.

It seems that the cardiologists would feel more pressured to order tests to be done on their machine for both inpatients as well as outpatients, and the involved radiologists are more likely to suggest that the hospitalists order certain studies to be done on that particular scanner. These parties especially feel the pressure to do more scans when the anticipated volume was not originally met. In my opinion, this sounds like a perfect example of why the Stark Law came in to effect.

In conclusion, the Stark law protects government programs, like Medicare and Medicaid, by ensuring that unnecessary tests or procedures are not done simply to benefit physicians for financial gain. While there are certainly benefits in terms of maintaining financial integrity in the healthcare system, there are also questions as to what this will mean for the sustainability of Physician groups to partner with labs and diagnostic imaging devices in a hospital setting. The Stark Law will safeguard Medicare and Medicaid, but time will only tell if this law will truly improve the healthcare process and provide better patient outcomes.

References “PHYSICIAN SELF-REFERRAL EXCEPTIONS FOR ELECTRONIC PRESCRIBING AND ELECTRONIC HEALTH RECORDS TECHNOLOGY. “Www. cms. hhs. gov. Ed. CMS Office of Public Affairs. ” 1 Aug. 2006. “STARK LAW – Information on penalties, legal practices, latest news and advice. ” Http://starklaw. org/default. htm. May 2009. “Key Aspects of the Final Stark II Rule. ” AIS: Specialized Business Information for Health Care Managers. 2009. 17 May 2009 . “Court Lacks Jurisdiction Over Challenge to Stark Law’s New Definition of ‘Entity'” Healthcenter. bna. com. 22 Apr. 2009. 17 May 2009 .