WASHINGTON-Call a lawyer. The Stark II proposed regs have landed.   Passed in 1993 as an expansion of the 1989 Stark I self-referral law, Stark II has been viewed as a ticking bomb for thousands of physicians’ business arrangements. Now that HCFA has finally issued its proposed version of how Medicare and Medicaid will enforce Stark II, physicians and their lawyers are combing through the regs’ 400-plus pages to see whether they’ve been anointed or disjointed.   Early lawyerly looks suggest that Stark II is not quite as fearsome as it’s been portrayed. The regs are “probably a net plus,” at least when compared with the more restrictive provisions that HCFA was considering a year ago, says Larry Oday of Vinson & Elkins in Washington.   The regs are “a kind of grab bag,” says Charles Oppenheim of Foley & Lardner in Los Angeles. “There’s the good, the bad, and the ugly. And some provisions are just head-scratchers.” Says Philadelphia lawyer Alice Gosfield, “Where you stand will depend on where you sit.” Some groups will be well-positioned, she adds. Others will have to restructure.   The AMA studied the regs for three weeks before venturing a comment. It was disturbed by any need to restructure. It was also unhappy with the limited flexibility of HCFA’s interpretation of “direct supervision,” which some feel requires all activities in a physician’s office related to Stark II-covered services to come to a halt every time a physician steps away (see related story).   Stark I prohibits physicians from referring patients in Medicare to a clinical lab if they or immediate family members have a financial stake in that lab. Stark II expands that prohibition to Medicaid and 10 other services, including all inpatient and outpatient hospital services. Violations can lead to civil fines of up to $15,000 per referral and a ban from Medicare and Medicaid.   Some analysts say the advent of managed care has made the law and the regs obsolete. “There’s not a lot of incentive to overuse at the moment,” says Karen Collishaw of the American College of Cardiology. But Rep. Pete Stark (D-Calif.) stands firm, insisting that referrals increase when doctors have a financial incentive.   It’s too soon to say whether organized medicine will try again to overturn Stark II, or whether it’ll just work with HCFA on the regs, says Robert Doherty of the American Society of Internal Medicine. With the emphasis on fraud and abuse, outright repeal or even legislative changes may be a pipe dream, he says.   Perhaps the biggest piece of good news for doctors is that HCFA plans to create broad exceptions to the law. Stark II includes a handful of exceptions-but if no financial relationship fit neatly into them, they went into legal limbo.   Now HCFA says that any commercially reasonable business arrangement may be protected as long as it meets certain standards, including that it’s in writing, specifies the items and services to be provided, offers fair-market-value compensation that does not depend on the volume of referrals generated, and does not violate the antikickback statute.   If that provision becomes final, Stark II could become simpler to interpret, and it could accommodate the vast majority of nonabusive compensation arrangements between physicians and businesses.   But, Gosfield warns, “just because you survive Stark II doesn’t mean you survive the antikickback law.” In another plus for doctors, HCFA plans to repeal its earlier position that referral by any member of a group that includes a single physician who has financial ties to an organization is as tainted as a referral by the related physician. Now HCFA says that when the law speaks of a prohibited referral by a “physician who has a financial relationship,” it means that physician alone.   But if a senior member of the group can influence the group’s referrals, the prohibition may apply.   HCFA also attempts to rectify another frustrating aspect of Stark II-its failure to provide an exception for “de minimus” compensation arrangements, which range from providing physicians with free coffee to giving them malpractice insurance. Now HCFA says physicians may accept noncash compensation from businesses to which they refer, as long as it does not exceed $50 per item and $300 per year, is provided to all similarly situated individuals, and does not take into account referrals.   Under the “ugly” heading, Oppenheim places the regs’ reporting requirements. Stark II requires each organization that bills Medicare to give HCFA information on ownership, investment, and compensation arrangements, including the names of all financially related physicians.   HCFA agrees that information on all financial relationships with doctors could be “overwhelming and perhaps almost impossible to acquire.” So it proposes limiting the data to that which the physicians or groups “know or should know” in “the course of prudently conducting business.” HCFA cites IRS and SEC filings.   But Oppenheim says organizations may be hard-pressed to determine what financial relationships they “should” know about, as opposed to the ones they do know about. It will be harder still to determine what “the course of prudently conducting business” means.   This provision could test “the patience of even the most fanatical and detail-oriented compliance zealot, not to mention the typical health-care provider struggling to survive,” Oppenheim says. -Christina Kent www.access.gpo.gov/su_docs/aces/aces140.html