Major Stark Provisions in 2016 Proposed Medicare Physician Fee Schedule

On July 8, 2015, the Centers for Medicare & Medicaid Services (CMS) released a proposed rule containing major provisions relating to the Physician Self-Referral Law (i.e., the Stark Law) and its exceptions. CMS states that the purpose of the Stark proposals is: “to accommodate delivery and payment system reform, to reduce burden, and to facilitate compliance,” as well as to “expand access to needed health care services.” CMS also states that it realizes that “additional clarification” of Stark would help.

Below is a brief summary of the proposals affecting the Stark Law:

a) Proposes new Stark exception for recruitment assistance and retention payments from hospitals, federally-qualified health centers (FQHCs), and rural hospital clinics (RHCs to physicians to assist them in employing non-physician practitioners (NPPs) in the geographical area served by the hospital, FQHC, or RHC providing the remuneration.
• The exception would not apply to remuneration flowing to a group practice or other type of physician practice (i.e., physician organizations). But, the exception would protect physicians from being considered to be “standing in the shoes of the physician organization” when determining a direct compensation arrangement.
• The exception would only apply where the NPP is a bona fide employee of the physician (or physician’s practice).
• The exception would only apply to NPP services that are primary care services (i.e., family practice, internal medicine, pediatrics, geriatrics, and OB-GYN).
• Additional proposals seek to limit or “cap” the remuneration allowed under this exception.

b) Proposes adding a definition of the geographical area served by FQHs and RHCs under 42 CFR 411.357(e).

c) Proposes to standardize the various terms (e.g., “based on” or “without regard to”) used for the principle of “takes into account” referrals to clarify that there are not different volume or value of referral standards in the Stark exceptions.

d) Proposes revisions to clarify that the policy stated in the Stark Phase III regulations regarding retention payments in underserved areas (42 CFR 411.357(t)) is correct and remains CMS’s policy.

e) Proposes revisions to clarify that the Stark exceptions requiring that a lease or arrangement be set out in writing do not require a single formal contract. Rather, “a collection of documents, including contemporaneous documents evidencing the course of conduct between the parties, may satisfy the writing requirement.” Additionally, the proposed rule clarifies that the one-year term requirement is satisfied “as long as the arrangement clearly establishes a business relationship that will last for at least 1 year.”

f) Proposes to extend the “holdover” arrangements permitted by 42 CFR 411.357(a), (b) and (d) from six months to indefinitely (or, alternatively, a longer but definite period), provided that the holdover continues on the same terms and conditions and that it meets the fair market value requirements. Additionally, CMS proposes to revise the fair market value compensation exception “to permit renewals of arrangements of any length of time, including arrangements for 1 year or greater.”

g) Proposes to revise the definition of remuneration to clarify that if one of the six statutory exceptions to remuneration applies, then the term “used solely” does not mean that the exception does not apply if the item, device or supply is used for more than one of the six statutorily allowed purposes.

h) CMS clarifies that employees or independent contractors do not “stand in the shoes” of their physician organization’s arrangements “unless they voluntarily stand in the shoes of the physician organization as permitted under 42 CFR 411.354(c)(1)(iii) or (c)(2)(iv)(B). Additionally, CMS proposes to remove the phrase “stands in the shoes” from the definition of “locum tenens physician.”

i) Proposes to expand the exception for ownership of publicly traded securities to include protection for “trading on an electronic stock market or OTC quotation system in which quotations are published on a daily basis and trades are standardized and publicly transparent.”

j) Proposes a new exception for timeshare leasing “that would protect timeshare arrangements that meet certain criteria,” including, but not limited to, that “the arrangement is between a hospital or physician organization (licensor) and a physician (licensee) for the use of the licensor’s premises, equipment, personnel, items, supplies, or services…used predominantly to furnish evaluation and management services.” This exception would not apply to independent diagnostic testing facilities or clinical laboratories.

k) CMS provides further guidance to physician-owned hospitals on the disclosure of its ownership interests, including that social media websites are not considered to be public websites for the hospital.

l) CMS also solicits comments on the affect that the Stark Law may have on Accountable Care Organizations.

In addition to the above-noted Stark provisions, the proposed rule contains a number of other proposals, including provisions on appropriate use criteria for advanced imaging services, telehealth, self-referral disclosure protocol, and more. More information on these provisions will be coming soon.

For more information, please contact Adrienne Dresevic, Esq., at adresevic@thehlp.com or (248) 996-8510.