CMS Proposes Significant Revisions to Stark Law


In the CY 2016 physician fee schedule suggested rule, the Centers for Medicare and State medicaid programs Services (“CMS”) proposes significant amendments and clarifications towards the federal physician self-referral rules, generally referred to as “Stark” rules.1 As a result of CMS’ experience reviewing hundreds of self-disclosures made underneath the Voluntary Self-Referral Disclosure Protocol, most of the suggested changes usually are meant to reduce perceived or actual technical noncompliance using the Stark rules to ensure that hospitals along with other entities that bill the Medicare program for Stark “designated health services” can avoid violations according to certain contracting miscues that don’t create significant chance of program abuse. Additionally, the suggested rule includes clarification and changes towards the rules relevant to physician-owned hospitals.

I. “In Writing,” Term, Holdover, and Signature Proposals

The Stark rule proposals with largest applicability involve the necessity that written lease, services, along with other plans be “in writing.” CMS proposes through the Stark rules to alter most references to some written “agreement” or “contract” to some written “arrangement.” This transformation is supposed to signify that “there isn’t any requirement underneath the physician self-referral law that the arrangement be documented in one formal contract.” Rather, CMS claims that:

[d]epending around the details and conditions from the arrangement and also the available documentation, an accumulation of documents, including contemporaneous documents evidencing the path of conduct between your parties may fulfill the written dependence on the leasing exception along with other exceptions that need that the arrangement be put down on paper.

To become obvious, CMS highlights that the written arrangement continues to be needed for instance, to ensure that compensation to become “set in advance” as needed under many Stark exceptions, the compensation rate should be documented on paper prior to the services, lease, or any other arrangement begins.

If adopted in final form this transformation may help hospitals along with other providers avoid Stark violations when contracting practices don’t keep pace with operational changes. For example, if your hospital includes a written and Stark-compliant space lease having a physician practice, and also the parties expand or affect the amount or location of leased space without amending or modifying the formal contract, this transformation could permit the parties to find out they’re in compliance with Stark according to a test of e-mails, records of modified fair market price lease payments, along with other documentation indicating a contract towards the modification.

Certainly the proposals indicate CMS’ readiness to highlight the quantity (i.e., fair market price) and nature (i.e., not considering the amount or worth of referrals or any other business generated between your parties) of compensation between referral sources, instead of contracting formalities.

CMS also provides allow parties to fulfill the main one year term requirement present in lease and services exceptions with documentation indicating the arrangement actually lasted not less than twelve months, instead of counting on an itemized hire a mentioned term with a minimum of twelve months. For instance, documentation that the physician group leased equipment from, making lease payments to, a medical facility for 18 several weeks would fulfill the term requirement within the equipment lease exception, even when there’s no term provision within the written contract between your parties.

Another proposal would considerably lengthen the present 6-month holdover period that enables parties to carry on their compliance having a lease or services exception under Stark even if your term of the written contract has expired as lengthy as certain the weather is met (including the arrangement satisfies the needs of the exception if this expires and continues on a single conditions and terms after its mentioned expiration). CMS provides permit indefinite holdovers, or else, allowing holdovers for any definite period more than 6 several weeks. While any change lengthening the holdover period will be a positive development for providers battling to conform using the technical nature from the Stark rules, CMS notes that rental amounts must stay consistent with fair market price over the holdover period, or even the arrangement will neglect to satisfy the exception.

Under another proposal, parties could obtain signatures on the written arrangement within 3 months, as long as the arrangement otherwise matches a Stark exception, whether or not the failure to get the signature before the start of the arrangement was accidental (presently, the rules offer only a 30-day window to acquire signatures when the failure to conform wasn’t accidental) and also the allowance can be used just once every three years with regards to the same referring physician.

If adopted in final form these proposals would add necessary versatility to Stark’s strict liability regulatory structure. However, it might be essential that providers not depend on such changes to unwind an excessive amount of when contracting with referral sources. CMS is obvious in the comments that even though they are proposing added versatility, they continuously require that fundamental the various exceptions be satisfied. For instance, if parties begin an agreement for expertise without documenting the compensation rate and methodology before services begin, the parties can make Stark liability even underneath the recent proposals since the fundamental requirement that compensation terms to become put down on paper just before commencing the help remains. Similarly, when the compensation rate within lengthy-term lease arrangement isn’t reviewed periodically and is lost of fair market price, then there’s a Stark breach in line with the insufficient fair market price compensation even when contemporaneous documentation may help meet additional factors from the Stark lease exception.

II. New Timeshare Exception

CMS provides give a Stark exception for timeshare plans, where a hospital licenses work place, equipment, and personnel to some physician or physician organization. Additionally to exception needs based in the work place lease exception, the suggested timeshare exception includes unique safeguards, together with a requirement the licensed premises, equipment, and staff is used mostly to furnish physician evaluation and management (“E&M”) services (instead of ancillary services), any equipment taught in timeshare arrangement should be found in the office suite in which the physician performs the E&M services and used simply to furnish designated health services incidental towards the physician’s E&M services during the time of such E&M services, and could not include advanced imaging, radiotherapy, or laboratory equipment (apart from equipment accustomed to perform CLIA-waived tests). Furthermore, while CMS is proposing that parties towards the timeshare week arrangement be permitted to look for the license charges with an hourly, daily, or any other time-based basis, they wouldn’t be allowed to utilize a compensation methodology in line with the quantity of patients seen or revenue billed.

III. New Exception for that Recruitment of Nonphysician Practitioners

To update the Stark rules to facilitate greater use of primary care services and acknowledge the higher role of nonphysician practitioners within the delivery of primary care services, CMS provides give a new Stark exception to safeguard remuneration supplied by a medical facility, federally qualified health center, or rural health clinic to some physician or even the physician’s practice to assistance with the use of certain nonphysician practitioners. Structured with safeguards similar to the physician recruitment exception, the nonphysician specialist recruitment exception would apply simply to recruitment of the physician assistant, nurse specialist, clinical nurse specialist, or certified nurse-midwife that turns into a genuine worker from the physician to supply primary care services. CMS views “primary care services” to incorporate general family practice, general internal medicine, pediatrics, geriatrics, and obstetrics and gynecology services. Particularly, CMS claims that the suggested exception wouldn’t affect the recruitment of certified rn anesthetists.

The suggested exception wouldn’t safeguard plans for help to some physician to train on a nonphysician specialist who furnishes niche care for example cardiology or surgical services. Additionally, the recruitment assistance could be restricted to the low of: (a) 50% of the particular salary, signing bonus, and benefits compensated towards the nonphysician specialist during a maximum of the very first 24 months of employment or (b) the particular salary, signing bonus, and benefits compensated towards the nonphysician specialist during a maximum of the very first 24 months of employment minus the quantity of all receipts due to the nonphysician practitioner’s services.

IV. Physician-Owned Hospital Exception

The Suggested Rule includes changes and clarifications towards the Stark rules governing physician-owned hospitals. The Individual Protection and cost-effective Care Act (“ACA”), enacted this year, enforced additional needs for physician-owned hospitals, including requiring that such hospitals disclose the truth that a healthcare facility is partly owned or committed to by physicians on any public website or public advertising for that hospital. The ACA also so long as the proportion from the total worth of the possession or investment interests in a hospital by physician proprietors or investors couldn’t exceed such percentage by March 23, 2010.

Since 2011, physician-owned hospitals happen to be needed to reveal the hospital has physician proprietors or investors around the hospital’s public websites and then any public advertising. As a result of numerous demands from industry stakeholders seeking clarification about these needs, CMS has suggested to limit the groups of web sites and also the types of advertising that will require physician possession disclosure, and also to clarify the kinds of disclosure statements that might be sufficient to conform using the disclosure needs.

Particularly, to be able to provide more clearness about when disclosures are needed, CMS provides list the kinds of websites that wouldn’t be considered “a public site for that hospital.” Importantly, their list would come with social networking websites. CMS noted that communications (for example maintaining a person page online, posting a relevant video, or posting messages) using a social networking website shouldn’t be construed like a website ‘‘for a healthcare facility,’’ since web site is operated and maintained with a social media service generally open to other users. CMS also proposes that sites for example electronic patient payment portals, electronic patient care portals and electronic health information exchanges would ordinarily ‘t be considered public websites, as these sites are usually only accessible to patients who happen to be treated in the hospital. Note, though, that CMS did caution that the site that isn’t a “public website for that hospital” can always be looked at “public advertising for that hospital” based upon the details and conditions from the scenario and knowledge provided.

CMS provides define “public advertising for that hospital” just like any public communication compensated for through the hospital that’s mainly meant to persuade visitors to seek care in the hospital. The suggested rule includes types of communications that wouldn’t be considered public advertising for that hospital, including communications made with regards to recruiting hospital staff, public service bulletins and community outreach. Still, CMS advised suppliers that whether a particular communication would constitute public advertising depends around the specific details and conditions from the communication.

Investment Levels

CMS also proposes changes that address baseline percentage amounts of physician possession or investment interest. Inside a prior rulemaking, CMS required the positioning that possession or investment interests of non-referring physicians didn’t have to be considered when calculating the baseline physician investment level or any subsequent physician investment level calculation (“physician investment level”).

CMS has suggested to revise prior policy to want the physician investment level include indirect and direct possession and investment interests, whether or not the doctor refers back to the hospital. Furthermore, possession or investment interests held by physicians who no more practice medicine could be counted when the individual satisfies the Stark Law meaning of “physician.” The suggested rule features a meaning of “ownership or investment interest” like a direct or indirect possession or investment curiosity about a medical facility.

Acknowledging the suggested change might cause compliance issues for hospitals that trusted the prior guidance when calculating their baseline physician investment levels, CMS has suggested to obstruct the effective date from the new regulation to ensure that physician-owned hospitals have plenty of time in the future into compliance using the new rule.

V. Conclusion

The suggested amendments towards the Stark rules within the CY 2016 physician fee schedule rule, if adopted, will probably reduce the amount of Stark violations self-reported to CMS underneath the self-referral disclosure protocol according to technical contracting errors. However, hospitals along with other providers should avoid using the proposals to discard or avoid efforts to apply strict written contracting standards and practices with physicians along with other referral sources. The Stark rules (whether or not the proposals are adopted) along with other federal and condition fraud and abuse laws and regulations (like the anti-kickback statute) still create daunting legal risks for suppliers that neglect to implement, maintain, increase contracting processes with referral sources.

Comments around the suggested rules are due no after September 8, 2015.

1   The full text of the proposed rule can be found here:



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