New Appeals Court Decision Streamlines Stark Challenge

Normally, challenges to healthcare related regulatory changes have to jump through an administrative hoop before they can file suit.  They can’t just run to court.  They have to go through CMS first and allow CMS the opportunity to justify the new regulation.  A recent appellate court ruling changes this.

The Council for Urological Interests (CUI) is a national organization of physician-owned joint ventures.  As many readers know, for instance “under arrangement” lithotripsy services, for instance, are a common joint venture type business for urologists to be engaged in.  The CUI filed suit in response to 2008 changes to the Stark Law, which would have interfered with certain urology-centered joint venture businesses, but the lower court dismissed the suit because the CUI was first required to go through “administrative review” required by the Medicare Act.  The appellate court disagreed and agreed to hear the CUI suit.  The case should make it easier to file legal challenges in response to regulatory changes, like Stark Law developments.

The case is also important because the Stark Law change in 2008 (effective in 2009) made it difficult (impossible in some instances) for physicians to act as service providers to hospitals.  These “under arrangement” transactions were ok because the hospitals billed for the “designated health services,” not the doctors.  The Stark Law change, effective in October, 2009, interfered with such relationships (between physicians and hospitals) by determining that the “under arrangement” providers were actually providing the service (even though the hospital, not the doctor entity, billed for the service).

Though the jury is still out on the substance of the CUI lawsuit (whether the Stark changes are unlawful), the case will pave the way for more legal challenges of this type.

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