The Center for Medicare and Medicaid Services (CMS) is seeking comments on proposed changes to Stark “stand in the shoes” (SITS) provisions published in the Federal Register on April 30, 2008.  The changes affect both physicians and entities that provide specified “designated health services” (DHS).  The proposed changes – intended by CMS to prevent fraud and abuse – could have far-reaching effects on many physician/hospital financial relationships if promulgated.  Interested parties have until June 13, 2008 to submit comments to CMS regarding the impact the proposed changes will have on health care in their communities.

Physician SITS Provision

In September 2007, CMS published “Stark III” final rules with a December 4, 2007 effective date.  Stark III revised the definition of compensation arrangements under the physician self-referral law: in determining the existence of a direct or indirect compensation arrangement, a referring physician is deemed to “stand in the shoes” of his or her physician organization.  In November 2007, CMS delayed the application of the physician SITS provision to academic medical centers and integrated 501(c)(3) health care systems for one year to allow CMS to better study how the SITS provision would impact compensation arrangements involving “mission support” payments.

On April 30, 2008, CMS proposed two refinements to the physician SITS provisions of December to allow “non-abusive” compensation arrangements related to “mission support.”  The first proposal would modify the physician SITS provision so that a physician would not stand in the shoes of his or her physician organization if the compensation arrangement between the physician and the physician organization met the employment, personal services or fair market value exceptions—based on the underlying rationale that compensation arrangements that meet these exceptions are consistent with fair market value by design.  CMS has asked for feedback on various aspects of this proposal, including whether the physician SITS provisions should apply to ownership arrangements when a physician has only a nominal ownership interest.