CMS Proposes Changes to the Stark Law Regulations.
Date posted: October 24, 2019
The Centers for Medicare & Medicaid Services (CMS) recently released a proposed rule to reduce the regulatory impact and burden of the physician self-referral law (Stark law). The Stark law prohibits physicians from referring patients for certain services payable by Medicare to entities in which they or their immediate family members have financial interests, unless a statutory or regulatory exception applies. In turn, these entities may not bill Medicare for prohibited referred services. Since the Stark law has not been significantly updated since 1989, the proposed rule attempts to modernize the regulations to align with the current health care landscape of value-based health care and reduce unnecessary burden on physicians and other health care providers. CMS previously solicited comments on the topic back in June 2018 and received 375 comments. In designing its proposals, CMS took these responses into account, as well as its experience in administering the physician Self-Referral Disclosure Protocol (SRDP) and working with law enforcement. Accordingly, the proposed rule attempts to revise or create new exceptions, amendments, and guidance regarding the Stark law for certain value-based compensation arrangements between or among physicians, providers and suppliers, and for other non-abusive cybersecurity and EHR related arrangements. Additionally, CMS proposes to remove certain unnecessary requirements for some regulatory exceptions.
CMS issued the proposed rule in conjunction with the CMS Patients over Paperwork initiative and the Department of Health and Human Services (HHS) Regulatory Sprint to Coordinated Care. The agency also collaborated with the HHS Office of Inspector General (OIG) in developing some of the proposals included in the proposed rule. In accordance with these initiatives, the proposed rule creates various methods through which physicians and other health care providers can efficiently coordinate the care of patients they serve and ensure that patients receive the highest quality of care. CMS proposes these exceptions to encourage physician and other health care providers to enter into innovative arrangements to fulfill these goals and lower costs, without the fear of severe consequences for potential noncompliance with the Stark law.
Key provisions of the proposed rule include the following:
Proposed Stark Law Regulatory Exceptions
Value-Based Care and Care Coordination Exceptions
CMS proposes three exceptions for certain value-based compensation arrangements when they meet specific requirements based on the arrangement’s characteristics and the financial risk undertaken by the parties involved. The exceptions would apply to arrangements relating to care for both Medicare and non-Medicare patients. CMS provides several “value-based definitions” which must be met to qualify for protection under the exceptions. For example, a “value-based arrangement” is one that exists “for the provision of at least one value-based activity for a target patient population between or among: (1) The value-based enterprise and one or more of its VBE participants; or (2) VBE participants in the same value-based enterprise.” Value-based activities include those reasonably designed to provide an item, service, take an action, or refrain from taking of an action in furtherance of a value-based purpose. Value-based purposes include: “(1) Coordinating and managing the care of a target patient population; (2) improving the quality of care for a target patient population; (3) appropriately reducing the costs to, or growth in expenditures of, payors without reducing the quality of care for a target patient population; or (4) transitioning from health care delivery and payment mechanisms based on the volume of items and services provided to mechanisms based on the quality of care and control of costs of care for a target patient population.”
The first exception would protect remuneration pursuant to value based-arrangements between value-based enterprise (VBE) participants in a VBE that has assumed full financial risk for all patient care items and services for a target patient population for a specified time period. For Medicare beneficiaries, that would mean that the VBE is fully financially responsible for all Medicare Part A and B covered items and services. The second exception would protect remuneration paid under a value-based arrangement where the physician assumes meaningful downside financial risk for failure to achieve the purposes of the VBE. The third exception in this category applies to value-based arrangements regardless of the level of financial risk assumed. The arrangements protected by these exceptions must fit certain requirements to satisfy the exceptions.
The proposed rule also discusses and seeks comment on the applicability of the value-based care exception to indirect compensation arrangements in an unbroken chain of financial relationship between the physician and a third party.
Cybersecurity Technology and Related Services
CMS is proposing a new exception to protect arrangements involving the donation of certain cybersecurity technology and related services to help facilitate greater cybersecurity in the health care space.
Changes and Guidance Regarding Fundamental Terminology and Requirements
Both the statutory and regulatory exceptions contain specific requirements that arrangements must meet to receive protection. The proposed rule contains proposed updates, clarification, and the addition of several definitions including those related to the requirements of commercial reasonableness; volume or value of referrals; patient choice and directed referrals; and fair market value. Additional changes are made to the definition of Designated Health Services, Physician, Referral, Remuneration, and Transaction.
Qualifications for Group Practices
CMS is re-evaluating revenue streams, compensation, productivity bonuses and other critical parts of group practice requirements as they apply to the Stark law. Specifically, CMS is proposing a new section to address downstream compensation that derives from payments made to a group practice, rather than directly to a physician within the group, that relate to the physician’s participation in value-based arrangements. CMS is rearranging and clarifying certain language as it applies to which profit sharing and productivity bonuses are permissible. CMS is also proposing revisions to clarify how overall profits from a group practice can be distributed to physicians within the group.
Revisions and/or Deletion of Unnecessary Exception Requirements
Removal of the Requirement that the Arrangement Does not Violate the Anti-Kickback Statute or related Federal or State law
CMS does not find it necessary to include Stark law regulatory requirements pertaining to AKS compliance, or compliance with other federal and state laws or regulations regarding billing or claims submission. The agency notes that Congress did not require compliance with these laws to avoid the Stark law’s referral and billing prohibitions. As such, CMS proposes to remove some exception requirements that necessitate such compliance.
Ownership and Investment Interest
CMS is proposing to expand the concept of titular interest, which was originally used in the context of compensation arrangements, to ownership or investment interest provisions. Since a physician with a titular ownership or investment interest in a possible referral recipient would not increase the financial interest of the physician, there are fewer fraud and abuse implications. CMS also seeks comments on employee stock ownership plans (ESOP) and whether CMS should implement additional physician self-referral safeguards regarding ESOPs.
Special Rules on Compensation Arrangements
CMS proposes revisions to its policy on temporary noncompliance with the signature and writing requirements in different compensation arrangement exceptions. The agency would create a special rule that grants a grace period of 90 calendar days for satisfaction of these requirements. The proposed rule clarifies that the grace period would not run afoul of the common exception requirement that compensation be set in advance.
Exceptions for Rental of Office Space and Rental of Equipment
CMS proposes to add the following clarification to the regulatory text, “[f]or purposes of this exception, exclusive use means that the lessee (an any other lessees of the same office space or equipment) uses the office space or equipment to the exclusion of the lessor (or any person or entity related to the lessor). The lessor (or any person or entity related to the lessor) may not be an invitee of the lessee to use the office space or the equipment.” This text clarifies CMS’ longstanding policy that under the rental space and rental equipment section, the only party that must be excluded from using the space or equipment is the lessor.
Exceptions for Physician Recruitment
CMS proposes to eliminate the signature requirement for a physician practice that receives no financial benefit under a recruitment arrangement to reduce undue burden on certain physician practices. However, the practice must sign the writing documenting the arrangement if the hospital’s remuneration to the physician passes through the practice.
Exceptions for Remuneration Unrelated to the Provision of Designated Health Services
CMS clarifies, and seeks comments on whether it should limit, what it considers to be “remuneration related to the provision of designated health services.” CMS is proposing to incorporate the concept of patient care services for determining when remuneration for an item or service is tied to the provision of a designated health service.
Exceptions for Payments by a Physician
CMS is modifying its interpretation of the payment by physician regulatory exceptions. The payment by a physician statutory exception continues to be interpreted as a catch-all provision. However, CMS proposes to remove from the regulatory exceptions reference to the statutory exception. CMS also proposes that the regulatory exception would not be available to protect compensation arrangements specifically addressed by one of the other statutory exceptions. The proposed rule reiterates CMS’s position that this exception does not apply to office space rentals but retracts its position that office space is neither an “item” nor a “service.” CMS also emphasizes that “items or services” furnished under this exception for payments by a physician may not include cash or cash equivalents.
Exception for Fair Market Value Compensation
CMS notes that it has seen some legitimate and non-abusive rental or lease arrangements that fail to satisfy the requirements of the rental of office space exception and the exception in §411.357(y). For added stakeholder flexibility, CMS proposes to make the fair-market value compensation exception available to protect arrangements for the rental or lease of office space.
Exceptions for Assistance to Compensate a Nonphysician Practitioner (NPP)
CMS is proposing to define “NPP patient care services,” as it relates to the limited expansion of the physician recruitment exception to include NPPs in certain geographic areas. CMS proposes “‘NPP patient care services’ to mean direct patient care services furnished by an NPP that address the medical needs of specific patients or any task performed by an NPP that promotes the care of patients of the physician or physician organization with which the NPP has a compensation arrangement.” CMS also proposes conforming changes to the term referral when it indicates referrals from an NPP; they would be distinguished by the term “NPP referral.”
Electronic Health Records Items and Services
CMS is proposing to update provisions related to the electronic health records exception, specifically related to interoperability, data lock-in, donations of certain cybersecurity software and services, removal of the sunset provision originally part of the exception, and the terms “electronic health record” and “interoperable” to be consistent with the 21st Century Cures Act.
CMS seeks comments regarding its price transparency objectives, specifically in the context of the Stark law, both for value-based health care systems and for non-value-based health care systems.
CMS will accept comments on the proposed rule until Dec. 31, 2019.
The proposed rule is available at: