Republican Congress eyes Stark II lawin campaign against federal rules

March 15, 1995

Coalition mobilizes to defend self-referral banRepublican legislators bent on eliminating federal regulationsare taking a close look at Stark II, the federal ban on physicianself-referral arrangements in the Medicare and Medicaid

Coalition mobilizes to defend self-referral ban

Republican legislators bent on eliminating federal regulationsare taking a close look at Stark II, the federal ban on physicianself-referral arrangements in the Medicare and Medicaid systems.Although no legislation has yet been introduced, some CapitolHill observers believe that Republicans may offer a bill to amendor repeal Stark II in the near future.

A Republican effort to turn back the legislative clock wouldbe the latest chapter in the ongoing saga of federal attemptsto control physician self-referral. Stark II was passed two yearsago and took effect Jan. 1, but implementation of its provisionshas been slowed by red tape at the Health Care Financing Administration,which is responsible for enforcing the law.

HCFA officials said late last year that the agency would probablynot be able to aggressively enforce Stark II until the promulgationof regulations clearing up numerous ambiguities in the law (SCAN12/28/94).

A Congressional effort to revise Stark II will probably comefrom the office of Rep. Bill Thomas (R-CA), the congressman whoassumed leadership of the House Ways and Means Committee's subcommitteeon health. Thomas replaced physician self-referral foe Rep. PeteStark (D-CA) as chairman of the subcommittee when Republicanstook control of Congress in January. Thomas opposed Stark II whenthe legislation was under consideration in 1993.

A Thomas spokesperson said the representative decided to examineStark II after receiving comments on the law from constituents.

"This (Stark II) is something he is looking at,"said Bill Pierce, the congressman's press secretary. "Heis talking to other members (of Congress) about it."

Pierce declined to elaborate on Thomas' position regardingStark II, although he emphasized that as of late February, nolegislation had been introduced to amend the law.

Two medical associations, the Medical Group Management Association(MGMA) and the American Society of Internal Medicine (ASIM), areleading the effort to revise Stark II and its predecessor, StarkI. Stark I banned physician self-referral to clinical laboratories,while Stark II extended the ban to medical imaging and other healthservices (SCAN 8/25/93).

MGMA, which represents physicians in group practices, has takenthe harder line of the two groups. The association objects toStark I and Stark II on a number of points, particularly the listof designated health services covered by the laws. MGMA wouldlike to see the Stark laws revised by rescinding their authorityover many of the designated health services, according to RandyTeach, director of MGMA's Washington, DC, office.

"We'd like to scale the list back to those services wherethere is evidence that there are some problems," Teach said."The only area that we are aware of where there are problemsis in the clinical laboratories area. (In) the rest of the areas,we can't find any evidence of abuse."

MGMA would include diagnostic radiology in its list of servicesto be removed from Stark II's provisions, Teach said.

The association is building a coalition of like-minded professionalgroups and is drafting legislation that it plans to forward toCongress in the next several months. Thomas' subcommittee on healthwill probably be one of the first stops for the bill.

ASIM is also in favor of amending Stark I and Stark II to removecertain provisions that are onerous to its members, accordingto Dana Lichtenberg, health policy analyst for the group. LikeMGMA, ASIM would like to see the list of designated health servicespared back. The association believes that radiology services shouldremain under Stark II's purview, however.

"Studies have shown that there is abuse going on in radiology,"Lichtenberg said.

Stark supporters mobilize. Stark I and Stark II will not bealtered without a fight, however. A coalition of medical associationsthat support the laws held its first meeting on Feb. 27 to plana strategy to defeat any attempt to weaken the statutes. The coalitioneffort, which includes the American College of Radiology and otherorganizations listed as designated health services, is being organizedby the American Physical Therapy Association (APTA), accordingto Pat Cooney, assistant director of federal relations for theassociation.

"We are trying to prepare documents to use on the Hillto educate new members, especially new Republicans, about thepurpose of Stark I and II," Cooney said. "We want toprotect the intent of Stark I and Stark II, which is to ensurethat physicians are not operating under a system of self-referralin Medicare and Medicaid."

Any revision of Stark II that removes medical imaging fromthe list of designated health services would be a stunning developmentfor the imaging center industry and could put the brakes on themarket's ongoing restructuring effort. Physician-investor divestmentof imaging centers has not proceeded as rapidly as initially expected,but divestment has been picking up steam since the Jan. 1 deadlinepassed.

Many self-referring physicians in Stark II's gray areas arewaiting for HCFA to publish enforcement regulations that willclarify the law's ambiguities. Those rules, however, may run afoulof the Regulatory Transition Act (HR 450), a proposed federalmoratorium on new regulations. HR 450 passed the House by a widemargin in February and is headed to the Senate, where anotherregulatory moratorium is also under consideration.

If a moratorium becomes law, its impact on Stark II is uncertain.Gary Fields, an attorney with Proskauer, Rose, Goetz and Mendelsohnof New York City, believes the moratorium would apply to HCFA'simplementing regulations on Stark II, as well as the agency'sStark I regulations, which have not yet been finalized. The moratoriumwill not affect Stark II's legal status, however, because HCFAhas stated that the law is self-implementing even in the absenceof enforcing regulations. The moratorium would add confusion tothe market, Fields said.

"If there is a moratorium on new regulations, it's notgoing to help the process," Fields said. "We will havemore and more people who won't know if they are in compliance.The best thing to do right now is to read the statute."

The ambiguities in Stark I and Stark II and HCFA's delays inpublishing implementing regulations are powerful arguments forrewriting the laws, according to Teach of MGMA.

"Stark I regulations were issued in 1991 but were neverfinalized. Stark II regulations are nowhere to be seen,"Teach said. "If the department can't write regulations toimplement the laws, maybe you've got a bad statute that needsto be revised."