Significant Changes to Stark Regulations Finalized in 2016 Medicare Physician Fee Schedule

In July, we blogged about the major Stark Law provisions in the 2016 Proposed Medicare Physician Fee Schedule (the “Proposed Rule“). On October 29, 2015, the Centers for Medicare & Medicaid Services (“CMS“) released the final 2016 Medicare Physician Fee Schedule (the “Final Rule“) (available here), with few changes between the proposed rule and final rule as it related to the Stark provisions. The Final Rule will be published in the Federal Register on November 5, 2015. These are the first major changes to the Physician Self-Referral Rule (Stark Law) since 2009.

CMS stated that the Stark Law updates are meant to accommodate health care delivery/payment system reform, reduce burdens, facilitate compliance, clarify certain applications of the Stark Law, and issue new Stark exceptions. Below is a brief summary of the provisions adopted in the Final Rule:

(a) CMS adopted the proposed Stark exception for recruitment assistance and retention payments from hospitals, federally-qualified health centers (FQHCs), and rural hospital clinics (RHCs) to physicians to assist with employing non-physician practitioners (NPPs) in their geographical area. The only change from the Proposed Rule is the addition of a definition for the geographical area serviced by the FQHCs and RHCs, which is:

The “geographic area served” by a federally qualified health center or a rural health clinic is the area composed of the lowest number of contiguous or noncontiguous zip codes from which the federally qualified health center or rural health clinic draws at least 90 percent of its patients, as determined on an encounter basis. The geographic area served by the federally qualified health center or rural health clinic may include one or more zip codes from which the federally qualified health center or rural health clinic draws no patients, provided that such zip codes are entirely surrounded by zip codes in the geographic area described above from which the federally qualified health center or rural health clinic draws at least 90 percent of its patients.

(b) CMS standardized the various terms used for the principle of “takes into account” referrals (e.g., variations include “based on” or “without regard to”). CMS settled on standardizing the language to “takes into account” the volume or value of referrals.

(c) CMS clarified that the regulations in 42 CFR 411.357(t) regarding retention payments in underserved areas is correct. The Final Rule clarifies that the retention payment must not exceed the lesser of an amount equal to 25 percent of the physician’s current annual income averaged over the previous 24 months.

(d) CMS clarified that the Stark exception requiring that a lease arrangement be set out in writing does not require a single formal contract, but a collection of documents may satisfy the “writing” requirement. CMS did so by replacing the term “agreement” with the term “lease arrangement” throughout the regulation.

(e) CMS extended the “holdover” lease arrangement provision from six months to indefinitely (as opposed to a definite, but longer than six-month period as contemplated in the Proposed Rule). The new holdover lease language is applicable so long as the lease arrangement met the conditions of the exception prior to its expiration, the holdover is on the same terms and conditions as the immediately preceding arrangement, and that the holdover continues to satisfy the requirements of the exception.

(f) CMS revised the language of the exception to the definition of “remuneration” for items/devices/supplies that are used solely for one or more of the six purposes (i.e., collection, transportation, processing, storing, ordering, or communicating the specimen/results). The revision clarifies that the item can be used for more than one of the six purposes, so long as it is used solely for one or more of those purposes.

(g) CMS adopted the language in the Proposed Rule with regard to the clarification 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).

(h) CMS expanded the exception for ownership of publicly traded securities with the language from the Proposed Rule to include protection for “trading on an electronic stock market or over-the-counter quotation system in which quotations are published on a daily basis and trades are standardized and publicly transparent.”

(i) CMS added a new exception for timeshare lease arrangements between a physician and a hospital or unrelated physician organization for the use of premises, equipment, personnel, items, supplies, or services if certain conditions are met. The exception does not apply to advanced imaging, radiation therapy, or clinical/pathology laboratory equipment (other than equipment used to perform CLIA-waived laboratory testing).

(j) CMS added language to clarify that the physician-owned hospital disclosure requirements are not met by posting the ownership interest disclosure on a social media website, electronic patient payment portal, electronic patient care portal, or an electronic health information exchange.

For more information about the Final Rule or how the changes may affect you, please contact Adrienne Dresevic, Esq., at adresevic@thehlp.com, or Clinton Mikel, Esq., at cmikel@thehlp.com, or at 248-996-8510.