The effective date of the recently issued Stark II Phase II regulations is July 26, 2004. CMS is currently taking the position that all agreements must be in compliance by that date. This would include agreements that have already been executed and are in effect, notably, physician recruitment arrangements (e.g., the new rules do not permit a group to impose a noncompete on the recruited physician and limit the amount of group expenses that can be funded by the hospital). Health industry lawyers are working with CMS to address the significant issues this presents to the industry, including discussing a possible postponement of the effective date of the regulations as they would apply to statutory and regulatory exceptions that existed prior to the issuance of the Phase II regulations. At this time, however, CMS has not agreed to modify its position. We will be monitoring this issue and will keep you advised.
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