The Centers for Medicare and Medicaid Services (CMS) on March 23, 2007 filed a continuation notice in the federal register, which officially delayed the deadline for publication of the Phase III final rule interpreting the federal physician self-referral prohibition commonly known as the Stark Law until March 26, 2008. For the healthcare industry, and specifically physicians, this means that it may be several months before CMS addresses certain provisions that were included in the “interim final rule with comment period” issued by CMS on March 26, 2004 (referred to as the “Phase II rule”).

CMS had adopted a bifurcated final rulemaking approach to finalizing regulations to interpret the Stark Law. CMS published a final rule with comment period in the federal register on January 4, 2001 (the “Phase I rule”), to incorporate several aspects of the Stark Law into federal regulations. The Phase I rule addressed the general physician self-referral prohibition of the Stark Law, certain statutory and regulatory definitions of the designated health services subject to the Stark Law, and created new regulatory exceptions to the Stark Law.

An interim rule with comment period was published by CMS in the federal register on March 26, 2004 (the “Phase II rule”) to incorporate into federal regulations provisions related to the ownership and compensation exceptions to the Stark Law (e.g., the in-office ancillary services exception) as well as to address public comments received in response to the Phase I rule.  The Phase II rule also included new requirements of the physician recruitment exception to the Stark Law and raised several questions regarding block leasing arrangements with imaging and other facilities.

This continuation notice by CMS extends the timeline for publication of the Phase III final rule through March 26, 2008. The Phase II rule published on March 26, 2004 remains in effect through March 26, 2008 unless the Phase III final rule is published and becomes effective before March 26, 2008.

CMS commented in this continuation notice that the deadline extension was necessary in light of the extensive public comments CMS received requesting clarifications of the Phase II interim final rule. CMS also commented that it has undertaken an exhaustive review of the comments and devoted a significant amount of time and resources to the process.  Finally, CMS noted that the need to coordinate among federal agencies caused further delay to the final rule because the Stark rules are enforced by CMS, the Office of Inspector General, and the Department of Justice.