United States: CMS Proposes Exceptions, Revisions And Requests Comments To Ease Stark Law Compliance

Last Updated: September 8 2015
Article by Timothy J. Fry and Gretchen Heinze Townshend

The Centers for Medicare & Medicaid Services (CMS) recently proposed regulatory changes to the Stark Law that may ease certain compliance challenges. The Physician Self-Referral Law, located at 42 U.S.C. § 1395nn, and its regulations at 42 C.F.R. § 411.350 et seq. (commonly known as the Stark Law) prohibit a physician from referring a patient for Medicare- and Medicaid-designated health services (DHS) to an entity where the physician or his or her family has a financial relationship, absent an exception. As CMS reviewed recent cases and self-disclosures involving Stark Law violations, CMS decided changes were needed to clarify and ease provider compliance. A summary of these changes, which are included in the 2016 Physician Fee Schedule Proposed Rule, follows.

  1. New Exception: Non-Physician Recruitment. Currently an exception allows institutional providers − such as hospitals, federally qualified health centers (FQHCs) and rural health clinics (RHCs) − to provide recruitment incentives for a physician to relocate his or her practice to a geographic area served by such institutional provider. CMS proposes to add a similar exception allowing institutional providers to assist physician practices in the recruitment of non-physician practitioners (such as physician assistants and nurse practitioners) to furnish primarily primary care. CMS is seeking comments on whether this exception should require an objective need for primary care in the service area, limits on how many times an institutional provider may use this exception with a single physician, and whether there should be other safeguards in place.

    Under CMS’s proposal, among other proposed requirements, the physician practice will need to employ the non-physician practitioner as a bona fide employee (i.e., not as an independent contractor) for fair market value compensation. The physician practice will not be able to place certain practice restrictions on the non-physician practitioner within the institutional provider’s service area that unreasonably restricts the ability to provide patient case services. CMS also proposes certain restrictions on where the non-physician worked in the preceding three years to avoid institutional provider and physician efforts to “game” this exception by using it as a means to subsidize physician practices. CMS further proposes to allow this compensation be used to recruit only physician assistants, nurse practitioners, clinical nurse specialists and certified nurse midwives (i.e., no certified registered nurse anesthetists). Finally, CMS intends to cap payments to avoid windfalls to the physician practice at either 50 percent of actual salary, bonus and benefits or such costs subtracted by receipts attributable to the physician and limit duration of such payments to two years.
  2. New Exception: Timeshare Arrangement. Recognizing that physicians in rural areas or those starting new practice locations often seek timeshare arrangements for staff and space until established, CMS proposes a new exception for timeshare arrangements. Unlike the rental of office space exception, CMS does not intend to require a one-year agreement or exclusive use of the space. Instead, CMS proposes to allow timeshares where a hospital or a physician organization is the owner of the facility, provided the facility is not an independent diagnostic treatment facility or a clinical laboratory. CMS proposes to require, among other things: (a) that the space be used predominately to furnish evaluation and management (EM) services (i.e., not primarily for DHS); (b) that equipment be located in the office suite where the EM services take place; (c) that any DHS be incidental to and provided at the same time as the EM services; and (d) that the space not be used for certain advanced imaging services, radiation therapy or clinical or pathology lab services. For the first time, however, if the rules are finalized, nonexclusive arrangements for equipment, space and personnel will be allowed through a timeshare arrangement.
  3. Revisions to Holdover Provisions. Under the personal services arrangement and lease exceptions, CMS currently allows a holdover period (i.e., allowing the exception to continue after the written arrangement expires) on the same terms and conditions for six additional months. CMS is reconsidering this time limit, due to the multitude of unintentional Stark Law violations occurring when arrangements continued following the expiration date. CMS is considering an indefinite holdover period or, at a minimum, extending the holdover period beyond six months. Under either of these approaches, CMS expects the holdover to be on the same terms and conditions as the original agreement (if renegotiated, a new term of at least one year would be required). CMS believes this change will not pose program abuse risk as fair market value payments are required at all times during the holdover period. This means that if a holdover payment grossly exceeded or was grossly under fair market value (perhaps after a particularly long holdover such that fair market value has changed), the compensation would fail to meet the exception. Finally, the holdover period would need to be in writing but, as explained in item 4 below, would not need to be a formal contract; written documentation of factual circumstances showing that the agreement continued (e.g., cashed checks or an email indicating continuation of services) would be sufficient. This is a significant change and, if finalized, may provide significant relief to healthcare providers under the Stark Law.
  4. Revisions to Arrangements Being in Writing. CMS is proposing revisions to the requirement that arrangements be in writing. CMS stated in the proposed rule that providers incorrectly believe they need formal contracts to meet various exceptions, including rental of office space and rental of equipment leases. The exception language in the Stark Law regulations currently requires “agreements” in writing, which CMS proposes to revise to “arrangements” in writing. If the proposal is adopted, pursuant to a factual analysis, providers will be able to show that the arrangement’s terms are fair market value, set in advance and written, but will not need to have a formal contract (i.e., email correspondence may suffice if contemporary and providing sufficient detail). This clarification may give providers comfort that certain physician arrangements meet the Stark Law even if no formal contact in place. Commentary in a final rule may also help clarify the compliance of past arrangements that do not have written contracts.
  5. Revisions to Physician-Owned Hospital Notices/Advertisements. The Affordable Care Act (ACA) mandated that physician-owned hospitals (POHs) disclose their physician ownership on public websites and in public advertising. CMS acknowledges that some POHs may be violating these requirements unintentionally since CMS has provided limited guidance. CMS is proposing certain internet categories that will not be subject to mandatory disclosure, including social media, electronic patient payment portals, electronic patient care portals and electronic health information exchanges. Further, CMS is defining public advertising as any communication paid for by the POH and primarily intended to persuade individuals to seek care at the hospital. This means human resource recruitment, public service announcements and community outreach activities are not advertisements. For public advertisements, CMS proposes that the statement put a reasonable person on notice that the hospital may be a POH, which includes (i) a statement that the POH was founded by, managed by or operated by physicians, or is part of a health network that includes POHs; or (ii) physician ownership that is clearly stated in the hospital’s name (e.g., Doctor’s Hospital at Main Street). For instances where a hospital finds that one of its advertisements does not include this disclosure, CMS proposes that the noncompliance period extend for the period of the advertisement’s predetermined initial circulation (e.g., a monthly magazine would have a one-month initial circulation), and not the length of the time the ad actually sits available for the public’s consumption (e.g., a magazine sitting in a waiting room for months). The clarification helps POHs identify their liability as noncompliant notices would mean a POH’s physician owner could not refer to the POH during this period for DHS without violating the Stark Law.
  6. Revisions to Physician-Owned Hospital Bona Fide Investment Levels. The ACA also added a requirement that POHs could not increase their percentage of physician ownership from a baseline target date amount. CMS had previously stated the baseline and investment-level amounts were based on the percentage owned by referring physicians, not all physicians. CMS recognizes it may be difficult to calculate or determine if a physician was referring patients to the POH on the baseline date and this interpretation may not apply for certain POHs opened within eight months of the ACA’s enactment. CMS now proposes to eliminate the distinction on whether the physicians are referring or non-referring physicians. Recognizing some POHs may have increased their ownership among non-referring physicians since the baseline period, CMS proposes to phase in this change to allow ownership transfers.
  7. Revision to Temporary Noncompliance. CMS previously allowed an exception for a period of temporary noncompliance due to a missing signature. This period was set at 90 days for inadvertently unsigned arrangements and 30 days where the parties knew the agreement was unsigned. CMS is now proposing to standardize this as 90 days regardless of whether the parties knew about the missing signature or not. CMS proposes to keep in place the requirement that this exception be used only once every three years for a physician and that the arrangement meet all other requirements including being set out in writing during this period (i.e., drafted but not signed). This change should simplify compliance for providers.
  8. Revision to Geographic Area for Recruitment Exceptions. CMS previously used its discretion to expand the statutory physician-hospital recruitment exception for FQHCs and RHCs to also make such payments. In doing so, CMS borrowed the geographic service area definition of hospitals for FQHCs and RHCs in the exception’s requirements. The problem, however, is this definition involves inpatients but FQHCs and RHCs serve only outpatients. To rectify this situation, CMS is proposing two alternative approaches to define the FQHC and RHC geographic service area. First, CMS proposes to define the service area as the lowest number of contiguous zip codes where an FQHC or RHC draws at least 90 percent of its patients based on encounters. If this approach is adopted, noncontiguous zip codes may be added, if necessary, to reach this 90 percent number. An alternative approach would be to simply take the lowest number of zip codes, whether contiguous or not, that on an encounter basis constitute 90 percent of the facility’s patients. If this approach is adopted, a facility would add zip codes, in the order of highest to lowest percentage of patients.
  9. Revision to Retention Payments. CMS previously added an opportunity for hospitals, RHCs and FQHCs to make a retention payment to a physician who had a certified bona fide opportunity of employment to move 25 miles away. The policy behind these retention payments was to avoid a situation where physicians received recruitment incentives to relocate to an underserved area and then moved away when those payments ended, necessitating that the institutional provider make more recruitment outlays. CMS intended that these payments could continue indefinitely (provided they met the exception), but the regulatory text suggested that there would be a two-year payment limit. CMS is proposing to revise the regulatory text to be consistent with its intended policy and its preamble language that payments be based on a two-year average, but that they can continue beyond this period.
  10. Revision to Publicly Traded Exception. In the regulations, there is an exception for a physician owning publicly traded securities, including those on the National Association of Security Dealers (NASD) exchange. The NASD no longer exists. CMS is proposing to substitute electronic stock markets and over-the-counter (OTC) securities markets for NASD to modernize these rules, provided certain markers are present to reflect the original purpose to include NASD.
  11. Revision to Volume or Value Standards. CMS sought to draft exceptions that prohibit rewarding for referrals with language consistently referencing the volume or value of referrals or other business-generated standard. CMS noted in its proposed rule that in exceptions such as physician recruitment, medical staff benefits, obstetric malpractice subsidies and professional courtesy, CMS used inconsistent terminology. Since CMS meant for all exceptions to use the same terms, it is proposing to update the language without changing the substance.
  12. Revisions to Certain Definitions. CMS also proposes certain changes to regulatory definitions to improve clarity and ensure the proper application of the Stark Law. For example, the regulatory definition of “remuneration” suggests only one of six potential uses of an item, device or supply would not be remuneration. CMS always intended this to mean any of those six, including all six, would be excluded from the meaning of remuneration. Furthermore, in response to the Kosenske decision in the 3rd Circuit, CMS clarified that remuneration is not supposed to include a physician’s use of a hospital space to provide professional services to a patient where that hospital bills for facility fees separately. A globally billed service may constitute Stark Law remuneration, however. CMS also proposed changes to the “stand in the shoes” standard so that all physicians of a group count in the volume or value standard, even though only owners and voluntary members actually stand in the shoes. This change is likely to receive numerous comments and is subject to further change. Finally, CMS proposes minor changes to the locum tenens physician definition.
  13. Solicitation of Comments on Alternative Payment Methods. CMS closed its proposed changes to the Stark Law with a request for comments on the Stark Law’s impact on alternative payment methods and gainsharing. As CMS noted, the shift to value-based purchasing and bundle payments implicates the Stark Law’s requirement that payment between DHS entities and referring physicians be segregated. Outside of narrow waivers granted in the Medicare Shared Savings Program and Center for Medicare and Medicaid Innovation waivers, the Stark Law prohibits certain relationships that may help foster clinical and financial integration. In this year’s Medicare Access and Chip Reauthorization Act of 2015, Congress required two reports examining these issues. To aid its efforts, CMS is asking the public to comment on ways the Stark Law hinders such gainsharing, quality and value-based purchasing schemes.

On the whole, these revisions suggest CMS wants to ease the burden of Stark Law compliance on providers. CMS noted throughout its proposed rule that it has received self-disclosures and other reports of violations that it does not believe pose fraud or abuse risks to Medicare or that do not represent actual violations of the Stark Law. Many of these proposals will be welcome by the provider community and may reduce the number of Stark Law procedural violations. That said, providers will continue to be challenged by these laws. They now face new guidance to digest, and may want to request additional changes from CMS either in response to these proposals or in advisory opinions. Such requests may find a positive response as CMS appears willing in this proposed rule to clarify the Stark Law to focus on fraud and abuse concerns while reducing provider burdens.

The public may comment on these proposals until September 8, 2015. The authors of this Legal Alert will be happy to speak with any provider seeking to submit such a comment letter.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions