United States: CMS Finalizes Revisions To Stark To Ease Burden On Providers, Refines "Incident To" Requirements

In its calendar year 2016 Physician Fee Schedule Final Rule published in the Federal Register on November 16, 2015 (Final Rule), the Centers for Medicare and Medicaid Services (CMS) finalized amendments to the federal physician self-referral (Stark) regulations proposed in the Physician Fee Schedule proposed rule released in July. Among the significant provisions contained in the Final Rule are (1) amendments and policy clarifications targeting Stark technical violations and compliance burdens, (2) a new recruitment exception and other changes focused on access to care, (3) an exception for timeshare licenses, and (4) amendments affecting physician-owned hospitals.

Key Changes Focused on Stark Technical Violations and Compliance Burdens

Prompted in part by its review of disclosures made under the Stark self-disclosure protocol for technical violations, CMS provides clarification and policy guidance on several exceptions and reduces the burden for providers through amendments to the Stark regulations. While these changes may help parties evaluating potential technical violations and self-disclosures for past conduct, they should not be taken as a signal to providers to abandon their current compliance protocols.

  • Writing Requirement. CMS clarified that there is no substantive difference among the writing requirements of the various compensation exceptions, despite the use of different terminology, and finalized its proposal to substitute the word "arrangement" for "agreement" in the leasing exceptions to better reflect this policy. The agency explains there is no requirement that an arrangement be documented in a single formal contract. Rather, the relevant inquiry is whether the contemporaneous documentation of the arrangement would permit a reasonable person to verify compliance with the exception at the time a referral is made.

Examples of documents that may be aggregated to satisfy the writing requirement include:

  • Board meeting minutes and other documents authorizing payments for specified services
  • Hard copy and electronic communications between the parties
  • Fee schedules for specified services
  • Check requests or invoices identifying items or services provided, relevant dates, and/or rates of compensation
  • Time sheets documenting services performed
  • Call coverage schedules or similar documents with dates of services to be provided
  • Accounts payable or receivable records documenting the date and rate of payment, and reason for payment
  • Checks issued for items, services, or rent

Notably, the Final Rule provides that parties considering conduct predating the proposed rule may rely on this clarification because it reflects current CMS policy. While this clarification is a helpful fallback, the best practice remains for parties to enter into a formal written agreement to evidence compliance with these exceptions.

  • Term of at Least One Year. CMS finalized changes in the proposed rule to clarify that the one-year term requirement of the rental of office space, rental of equipment, and personal services exceptions does not need to be memorialized in a formal agreement. Rather, parties must have contemporaneous writings establishing that the arrangement lasted for at least one year, or be able to demonstrate that the arrangement was terminated during the first year and the parties did not enter into a new arrangement for the same space, equipment, or services during the first year.
  • Temporary Noncompliance with Signature Requirements. The agency amended the special rule for arrangements involving temporary noncompliance with signature requirements to allow the parties 90 days to obtain the required signatures, even if the noncompliance was not inadvertent. However, CMS did not adopt a commenter's suggestion to remove the provision that allows a designated health services (DHS) entity to use this special rule only once every three years. The Final Rule also indicates that what constitutes a "signature" for purposes of meeting an exception is flexible and, depending on the facts and circumstances, could include electronic signatures and typed names.
  • Indefinite Holdovers. The Final Rule liberalized the holdover provisions of the rental of office space, rental of equipment, and personal services exceptions to allow for indefinite holdovers, provided that the arrangement continues to meet all other requirements of the exception. Holdovers must continue on the same terms and conditions of the original arrangement, and must continue to meet all other elements of the applicable exception during the holdover period. For example, if office space rental payments are fair market value when the lease arrangement expires, but the rental amount falls below fair market value at some point during the holdover, the lease arrangement would fail to satisfy the requirement as soon as the fair market value requirement is no longer satisfied. CMS also cautioned that, depending on the facts and circumstances, the failure to apply a holdover premium that is legally required by the original arrangement may constitute a change in the terms and conditions of the original arrangement and therefore not meet the requirement that the arrangement continue on the same terms and conditions of the immediately preceding arrangement.

Other Technical Clarifications and Policy Guidance

CMS finalized a number of technical clarifications and changes to Stark exceptions and definitions aimed at improving clarity and ensuring proper application of CMS policies:

  • Stand in the Shoes. CMS finalized its proposal to remove the reference to "stand in the shoes" in the definition of locum tenens physician to avoid potential confusion with the stand in the shoes concept.
  • Split Billing. The agency affirmed its proposed position that a physician's use of a hospital's resources (e.g., exam room, nursing personnel, and supplies) in split billing arrangements does not constitute remuneration. CMS specifically declined to address whether the grant of an exclusive right to provide services could constitute remuneration in-kind, giving rise to a financial relationship.
  • Takes Into Account. The Final Rule amends certain exceptions to standardize references pertaining to the volume or value of referrals (e.g., takes into account, based on, without regard to) to clarify that there is only one standard.
  • Remuneration. CMS finalized its proposal to revise the regulatory definition of remuneration to clarify that remuneration excluded from the definition includes items, devices, or supplies used solely for one or more of the six enumerated purposes (e.g., the collection of specimens).

Recruitment and Access to Care

  • New Exception – Assistance to a Non-Physician Practitioner. The Final Rule contains a new exception for recruitment of non-physician practitioners (NPPs) that closely tracks the structure and requirements of the existing exception for physician recruitment, which CMS declined to extend to NPPs in its Phase III rulemaking. CMS explained its change in position was prompted by changes in the healthcare delivery and payment systems and a projected rise in demand for primary care and mental health services, especially in rural and underserved areas. The Final Rule expands the exception to apply to payments made by a hospital, federally qualified health center (FQHC), or rural health clinic (RHC) for not only primary care services, but also mental health services.

    Additionally, CMS has expanded the definition of NPP to include clinical social workers and clinical psychologists in response to comments on the proposed rule. The Final Rule also applies whether the NPP is recruited as a bona fide employee or an independent contractor. There are a number of requirements and limitations associated with the exception, including a requirement that "substantially all" (defined as at least 75 percent) of the NPP's patient care services be primary care or mental health services and a cap on the amount of assistance that may be provided.
  • Physician Recruitment. The Final Rule amends the physician recruitment exception to add a new definition of the geographic area served by an FQHC or RHC.

Timeshares

  • New Exception – Timeshare Arrangements. CMS finalized a modified version of the proposed new exception for timeshare leasing arrangements between hospitals or physician organizations and physicians for the use of premises, equipment, personnel, items, or services used predominately for evaluation and management (E&M) services. In its rulemaking, CMS recognized the existence of legitimate reasons for physicians to enter timeshare arrangements instead of traditional space leases (especially in rural and underserved areas) and acknowledged the challenges of structuring such arrangements in a compliant manner under Stark, including the exclusive use requirements of the rental of office space and equipment exceptions. CMS reiterated in the Final Rule that the new exception is not available for traditional lease arrangements that establish a possessory leasehold interest in the space – described as a "right against the world" (including the owner or sub-lessor of the space). The Final Rule is more liberal than the proposed rule in that it allows a hospital to be either the grantor or the grantee of the use of the space. This change will allow hospitals to take advantage of the timeshare exception for its employed physicians.

The new timeshare exception includes the following requirements and limitations:

  • The parties must be a physician or a physician organization in whose shoes the physician stands and a hospital or physician organization of which the physician is not an owner, employee, or contractor.
  • The premises, items, and services must be "predominately" used to furnish E&M services.
  • The compensation cannot be based on a percentage of revenues or per unit of services fees to the extent such fees reflect services provided to patients referred by the grantor.
  • Any equipment covered by the timeshare arrangement must be (1) located in the same building where the E&M services are furnished, (2) not used to furnish DHS other than those incidental to the E&M services furnished at the time of the E&M visit, and (3) not advanced imaging equipment, radiation therapy equipment, or clinical or pathology laboratory equipment (other than equipment used to perform CLIA-waived laboratory tests).

CMS provided valuable guidance on the meaning of "predominate use" for E&M services that should be considered when designing an arrangement under this new exception. Additionally, CMS discussed the permissible fee methodologies under the new exception in-depth.

Physician-Owned Hospitals

The Final Rule addresses requirements for physician-owned hospitals introduced by the Affordable Care Act, which restricted "grandfathered" hospitals from expanding or increasing the percentage of physician ownership beyond baseline bona fide physician investment levels existing on March 23, 2010.

  • Bona Fide Investment Level. The Final Rule adopts CMS's reversal of its prior position by requiring the calculation of the physician ownership level to include direct and indirect ownership and investment interests held by a physician regardless of whether the physician refers patients to the hospital. In recognition that some physician-owned hospitals may have relied on the agency's prior position, which included only referring physicians, CMS delayed the effective date of this revision to January 1, 2017. Significantly, some hospitals may be facing divestment of physician ownership in excess of the bona fide investment level.
  • Public Website and Public Advertising Disclosure. CMS finalized, without modification, its proposed amendment to the Stark regulations to provide more certainty regarding public website and public advertising disclosure requirements for physician-owned hospitals. The Final Rule generally limits the required disclosures, for example, clarifying that social media does not qualify as a public website triggering disclosure obligations.

Revisions to the Medicare "Incident to" Regulation

The Final Rule adopted revisions to the "incident to" regulation that governs Medicare payment for services performed by qualified auxiliary personnel under the supervision of a physician or NPP. Specifically, CMS finalized changes to the regulation to clarify that the physician or NPP billing for the incident to services must also be the physician or NPP who supervises the auxiliary personnel performing the services. CMS proposed to remove the last sentence of the regulation, which currently provides that the physician or NPP "supervising the auxiliary personnel need not be the same physician [or NPP] upon whose professional service the incident to service is based." In issuing the Final Rule, CMS recognized that its proposed deletion of this sentence introduced confusion about whether the supervising (and, therefore, billing) physician or NPP could be different from the ordering physician or NPP. CMS fixed this error by amending the regulation to state that the supervising physician or NPP need not be the same person who is "treating the patient more broadly."

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