A group of physicians lost their legal bid to challenge a pending change to federal self-referral rules, set to take effect Oct. 1, that would prohibit certain physician-hospital joint ventures considered legal under the existing Stark law.
The plaintiffs, a group of cardiologists and surgeons who own cardiac catherization labs providing services to local hospitals, sued the Department of Health and Human Services, arguing that the rule change would effectively prohibit such partnerships because both parties would be considered "entities" barred from receiving referrals. The plaintiffs claimed that this change violates the intent of the original Stark law, which bars physicians from referring patients to an entity in which they have a financial interest. The new rule will broaden the interpretation of "entity" to include those providing the services that are billed to Medicare, not just those who directly bill Medicare.
The U.S. District Court for the District of Columbia turned down the case, saying it had no authority to rule on the matter because CMS requires parties to bring an administrative claim against the agency first. But the plaintiffs’ attorney, Thomas Crane, says the doctors could not pursue an administrative appeal because they can’t bill or receive payments from Medicare under their joint-venture arrangements. "Under this decision, no physician [in these types of arrangements] can ever challenge a Stark law regulation," Crane said.
Judge Rosemary Collyer countered that the physicians’ hospital partners could file an administrative challenge on their behalf. The plaintiffs say they will seek a regulatory change rather than appeal the court’s decision.
"This was a Hail Mary at the end of the fourth quarter that didn’t work," says Mark Manigan, health law attorney with Brach Eichler in Roseland, N.J., of the case. Now that the court has declined to step in, Mr. Manigan says he expects "all the restructuring and unwinding of these under-arrangement deals" that began when the rule was first announced last fall "will continue unabated."
—Irene Tsikitas
