New CMS Rules Ease Some Complications with Stark Law

On November 16, the Centers for Medicare & Medicaid Services (CMS) published its final Medicare physician fee schedule rule in the Federal Register, which includes important updates to the federal physician self-referral law, more commonly referred to as the Stark Law.

The Stark law’s complexity has been a pain point for healthcare providers, with violations leading to increasingly expensive settlements in court. In a recent $237 million judgment against Tuomey Healthcare for Stark law violations, Modern Healthcare highlighted the judge’s comments that “Stark law has become a booby trap rigged with strict liability and potential ruinous exposure—especially when coupled with the False Claims Act.” The case recently settled for $72.4 million.

The new rules aim to ease compliance challenges and clarify problem areas, in order to better accommodate delivery and payment system reforms. A few of the highlights include:
  • Broadening compensation for and use of non-physician practitioners (NPPs): CMS recognizes that the projected shortage of primary care physicians, especially in rural areas, will make it increasingly problematic to meet the rising demand for primary care services. Therefore, they have: (a) expanded the type of services that NPPs can provide to patients to include mental health services; (b) broadened the definition of NPPs to include clinical social workers and clinical psychologists; (c) lifted some of the limitations on the compensation arrangements between physicians or physician organizations and NPPs (although a contractual relationship must exist directly between those two parties); and (d) granted hospitals, federally qualified health centers (FQHCs) and rural health clinics (RHCs) permission to assist physicians in employing NPPs to help serve their geographic area with certain limitations.
  • New exceptions for timeshare arrangements: CMS believes there is a greater necessity for arrangements in which hospitals or physician organizations allow physicians to use their premises, equipment, personnel or supplies, particularly in rural and underserved areas. The new rules allow these arrangements to exist if they meet certain criteria, such as: (a) the physician licensing the space must use it predominantly for furnishing evaluation and management services to patients (if the primary focus is designated health services, such as physical therapy, prosthetics, radiology or clinical lab services, then it is not protected); (b) compensation must be set in advance and consistent with fair market value (it cannot take into account the volume or value of referrals or other business generated between the parties); and (c) the arrangement doesn’t violate federal or state anti-kickback statutes governing billing or claims submissions.
  • Clarifying disclosures for physician-owned hospitals: The Affordable Care Act established a requirement that hospitals must disclose if it is physician-owned on any public web site or in any public advertising, which resulted in many questions about the definition of “public web site” and “public advertising.” The new rules clarify that a hospital’s “public web site” does not include social media sites, electronic payment portals or electronic health information exchanges. CMS also clarified that “public advertising for the hospital” includes any public communication paid for by the hospital that is primarily intended to persuade individuals to seek care at the hospital; it would not include material used for recruiting staff, public service announcements or community outreach. The new rules also clarify the type of language that CMS finds to be acceptable disclosure, where and how the disclosure should be listed, and confirms that the period of noncompliance is the period during which the hospital failed to satisfy the requirement.
There are many other intricacies that lie within the new CMS rules. While they are certain to provide some relief to hospitals, the Stark Law still holds very serious, and potentially very expensive, consequences for those that step over line.