In a final rule issued April 25, 2003, CMS extended the already-delayed effective date of the physician self-referral act's definition of "set in advance" until January 7, 2004. 68 Fed. Reg. 20,347 (Apr. 25, 2003). The extension follows closely behind a final rule issued last fall extending the effective date to July 7, 2003 — the second time the effective date had been delayed. 67 Fed. Reg. 70,322 (Nov. 22, 2002). The initial delay, issued as an interim final rule with comment period, 66 Fed. Reg. 60,154 (Dec. 3, 2001), provided for a one-year delay of a single provision of the Phase I final Stark II regulations, which otherwise became effective on January 4, 2002. A number of the statutory and regulatory exceptions included in the Phase I final regulations require that the amount of compensation received by a physician (or an immediate family member) be set in advance. In the Phase I final rule, CMS indicated that percentage arrangements would not meet the definition of set in advance. After receiving numerous comments, CMS decided to reconsider this issue, and published the first one-year extension. The additional delay will CMS allow time to reconsider the definition of compensation that is set in advance for percentage compensation methodologies and should give the agency additional time to issue its final Phase II regulations, which will deal more fully with the issue. With the November 2002 extension, CMS indicated that the Phase II final regulations would be issued far enough in advance of a July 7, 2003 effective date to allow physicians to modify their arrangements, if necessary, prior to the deadline. This latest extension of the effective date appears to signal that CMS no longer believes that this is the case. Importantly, in the newest extension, CMS specifically restates its position that until the final Phase II regulations are issued, compensation that is based on a percentage will be in compliance with the requirements for set in advance. The additional requirements of 42 C.F.R. § 411.354(d)(1), such as "fair market value" and "volume and value" remain in effect. For further information regarding the original extension, please read Sandy Teplitzky's article, "Stark II Regs' 'Set in Advance' Requirements Delayed," which appeared in the Winter/Spring 2002 issue of the Health Law Alert.