Earlier this week, New York State Governor Andrew Cuomo vetoed legislation that would have brought the State’s restrictions on physician self-referrals (the State Law) in line with the federal ban on self-referrals, which is commonly known as the Stark Law.

Generally, the Stark Law prohibits physicians from referring Medicare patients for certain designated health services (e.g., clinical lab, imaging, radiation therapy, and physician therapy services, among others) to an entity with which the physician (or a member of the physician’s immediate family) has a financial relationship, unless an exception applies. The State Law by and large mimics the Stark Law, but there are certain distinctions that make the State Law more restrictive. Notably, the State Law covers referrals of designated health services regardless of payment source, meaning remuneration from private insurers and managed care plans are covered by the statute. In addition, the Stark Law contains exceptions for the following additional types of arrangements that are not in the State Law, which make it more permissive:

• community-wide health information systems and e- prescribing items and services and electronic health record items and services (in contrast, the State Law only includes a limited allowance for the provision of computers and related equipment and supplies by a clinical laboratory to a health services purveyor),
• bona fide charitable donations,
• fair market value compensation arrangements, and
• a “temporary non-compliance” grace period for arrangements that, but for a ministerial error, otherwise comply with a Stark Law exception.

As many referring physicians and health law attorneys in New York know, conducting a Stark Law analysis of a referral relationship can be a frustrating task because a compliant relationship that satisfies the federal standards may very well be non-compliant from a State Law perspective. While conforming the federal and state exceptions with one another for this very reason may have made practical sense (indeed, it was the New York State Bar Association that lobbied hardest for this legislation), the Governor appears to have taken the position that a more restrictive statute, with greater safeguards against improper referrals, outweighs the functional benefits of consistency with its federal counterpart.