United States: CMS Proposes To Ever-So-Slightly Expand Stark Law Exceptions For Compensation Arrangements

The Centers for Medicaid & Medicare Services (CMS) proposes to revise regulations issued pursuant to the Federal physician self-referrals Statute (Stark Law) to harmonize the regulations with the newly enacted Bipartisan Budget Act of 2018 (Pub. L. 115-123, enacted on February 9, 2018).

Stark Law generally prohibits Medicare payment for claims resulting from physician referrals for certain designated health services to an entity with which he or she (or an immediate family member) has an ownership interest or compensation arrangement. The statute establishes a number of specific exceptions, and grants the Secretary of the Department of Health and Human Services (HHS) the authority to create regulatory exceptions for financial relationships that pose no risk of program or patient abuse. Within HHS, CMS is responsible for exercising the delegated authority.

In its commentary, CMS addressed three provisions from Section 50404 of the Bipartisan Budget Act:

  • Holdover provisions to permit a lease arrangement or personal service arrangement to continue beyond the stated expiration of the arrangement (42 U.S.C. 1395nn(e)),
  • The writing requirements in certain compensation arrangement exceptions (42 U.S.C. 1395nn(h)(1)), and
  • Signature requirements for certain compensation arrangement exceptions involving temporary noncompliance (42 U.S.C. 1395nn(h)(1)).
  1. The New Statutory Holdover Provisions

The existing regulations that set forth the exceptions for "rental of office space," "rental of equipment," and "personal services" arrangements already permit, under certain circumstances, the arrangement to continue indefinitely beyond the stated expiration of the written documentation describing the arrangement. See 42 C.F.R. § 411.357(a)(7), (b)(6), and (d)(1)(vii). Because the new statutory holdover provisions effectively mirror the existing regulatory provisions, CMS declines to revise the regulations.

  1. Stark Law Exceptions Requiring Compensation Arrangements to be in Writing

Stark Law exceptions that require that the arrangements be set out in writing include the exceptions for rental of office space and equipment, personal services arrangements, physician recruitment, fair market value compensation, and indirect compensation arrangements. The new statute provides that the Secretary is authorized to determine if the writing requirement is satisfied by a collection of documents, including contemporaneous documents evidencing the course of conduct between the parties involved. CMS' proposed addition ensures that the regulations conform with the statutory language, which is consistent with CMS' earlier preamble statements.

Though not previously codified in the regulations, CMS has stated that the writing requirement in various compensation arrangement exceptions in Section 411.357 can be satisfied by "a collection of documents, including contemporaneous documents evidencing the course of conduct between the parties." 80 Fed. Reg. 70886, 71315 (Nov. 16, 2015). In light of the new statutory provision, CMS proposes to add express language that provides that the writing requirement for regulatory compensation arrangement exceptions may be satisfied by a collection of documents, including contemporaneous documents evidencing the course of conduct between the parties.

  1. Signature Requirements for Certain Compensation Arrangements Involving Temporary Noncompliance

The signature requirement in the new statute provides that compensation arrangements involving temporary noncompliance is satisfied if:

  • Not later than 90 consecutive calendar days immediately following the date on which the compensation arrangement became noncompliant, the parties obtain the required signatures; and
  • The compensation arrangement otherwise complies with all criteria of the applicable exception.

Unlike existing regulations, under the newly added section, an applicable signature requirement is not limited to specific exceptions, and entities are not limited in their use of the rule to only once every three years with respect to the same referring physician. In addition, the newly added section does not include a reference to the occurrence of referrals or the payment of compensation during the 90-day period when the signature requirement is not met.

To conform the regulations with the recently added statutory provisions, CMS proposes to clarify which specific exceptions have signature requirements, delete the reference to the occurrence of referrals or the payment of compensation during the 90-day period when the signature requirement is not met, and remove the "once every three years" limitation.

Notably the effective date of the Bipartisan Budget Act was February 9, 2018, and thus, beginning on that date, parties who met the new writing or temporary noncompliance with signature requirements of section 1877(h)(1)(E) of the Act, who otherwise would have been barred, may avail themselves of the new statutory provisions.

CMS' stated purpose for the proposed regulatory revisions is to address any actual or perceived difference between the statutory and regulatory language, to codify CMS' policy on the writing requirement, and to make the Bipartisan Budget Act policies applicable to regulatory compensation arrangement exceptions. While the proposed revisions may not be strictly necessary because Congress has directly spoken to the precise questions at issue and CMS' stated policy with regard to the writing requirement is already treated with substantial deference, the proposed revisions certainly add consistency between the statutes and regulations, which should reduce confusion and improve ease of interpretation and compliance. The statutory codification of hold-over provisions, and the regulatory revisions with respect to the writing and signature requirements are consistent with the current administration's stated preference for less burdensome regulations. The statutory and proposed regulatory changes acknowledge operational realities within the health care industry that will now be accommodated without the draconian penalties that Stark Law violations may invoke.

Comment Period is Open

Any and all comments to the proposed revisions must be received by CMS no later than September 10, 2018.

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