Stark II Set In Advance Requirement to be Reconsidered for Percentage Arrangements

On Monday, December 3, 2001, CMS issued an interim final rule with comment period, delaying the effective date of the definition of “set in advance” as set forth in the January 4, 2001, Stark II Phase I regulations. The purpose of the delay is to allow CMS the opportunity to reconsider its position regarding percentage compensation arrangements based upon fluctuating or indeterminate amounts (e.g., gross revenues).

This decision, coming almost one month prior to the effective date of the Phase I final regulations, highlights CMS’s awareness that percentage compensation methodologies are quite common in the  industry and, accordingly, need to be given greater attention to avoid the unnecessary disruption of existing contractual arrangements. Nonetheless, it is important to note that CMS has not abandoned  the “set in advance” requirement for compensation under certain exceptions but, rather, has delayed the application of the prohibition against percentage arrangements.