February 2000 Bulletin

AAOS seeks changes in Stark II

Encouraged by Rep. Thomas’ legislation to address unintended consequences

While the prospect of a legislative fix for Stark II during the second half of the 106th Congress is uncertain in light of a shortened election-year session, AAOS will continue to lobby for changes. HCFA has now targeted sometime in May 2000 to release final regulations on Stark II.

AAOS was encouraged when Rep. Bill Thomas (R-Calif), chairman of the Health Subcommittee of the House Committee on Ways and Means, addressed the medical community’s concerns with Stark II by introducing the "Physician Self-Referral Amendments" (H.R. 2651) last year.

In a letter to Rep. Thomas, William Tipton Jr., MD, AAOS executive vice president, expressed AAOS’s strong support for "having taken a giant step in addressing the ‘unintended consequences’ of Stark II which have caused a great deal of confusion and consternation, as physicians throughout the country have attempted to comply in good faith with this confusing and inconsistent law."

Stark II prohibits physicians from referring Medicare or Medicaid beneficiaries to entities in which they or members of their immediate family have a financial interest for designated health services. Physical and occupational therapy, durable medical equipment (DME) and supplies, and orthotics and prosthetic devices are included in the extensive list of services.

Among several changes to Stark II, AAOS is seeking to:

H.R. 2651 removes the "site of service" requirement and purposes a new definition of general supervision for the in-office ancillary service exception. In his letter, Dr. Tipton urged Rep. Thomas to consider modifying his bill to exempt all in-office ancillary services including DME.

The Department of Health and Human Services’ Office of the Inspector General also recently released further clarifications of existing safe harbors under the Medicare anti-kickback statute, as well as issued eight new safe harbors. (See page 31). Unlike Stark II where a physician can be found to be in violation by the mere existence of a financial relationship, the anti-kickback statute requires proof of intent to receive payment of anything of value to influence the referral of federal health care business. Among the issues addressed in these safe harbors are investments and practice recruitment in underserved areas, sales of physician practices in underserved areas, investments in ambulatory surgical centers, and investments in group practices.

Kathryn Pontzer is senior associate in the AAOS Washington Office.

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