Alayna Frauhiger

Associate Editor

Loyola University Chicago School of Law, JD 2021

On October 9, 2019, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule to modernize and clarify the regulations that interpret the Medicare physician self-referral law (often called the “Stark Law”), which has not been significantly updated since it was enacted in 1989. As CMS tries to reconstruct the healthcare field, it is imperative for compliance programs to prepare for the changes in regulations to come. The following discussion provides a brief overview of the proposed changes but is not an exhaustive list of all rulemakings related to the physician self-referral law.

The Stark Law: (1) Prohibits a physician from making referrals for certain designated health services payable by Medicare to an entity with which he or she (or an immediate family member) has a financial relationship unless an exception applies; and (2) prohibits the entity from filing claims with Medicare (or billing another individual, entity, or third-party payer) for those referred services. A financial relationship is an ownership or investment interest in the entity or a compensation arrangement with the entity. Similarly, the Anti-Kickback Statute (AKS) prohibits transactions intended to induce or reward referrals for items or services reimbursed by the federal health care programs. Essentially, AKS is designed to protect federal health care beneficiaries from the influence of money on referral decisions and thus guard against overutilization, increased costs, and poor quality services.

HHS has identified the broad reach of the physician self-referral law, as well as the Federal anti-kickback statute and beneficiary inducements civil monetary penalty law, as potentially inhibiting beneficial arrangements that would advance the transition to value-based care and the coordination of care among providers in both the Federal and commercial sectors.

The proposed changes

Part of HHS’ Regulatory Sprint Coordinated Care were the proposals launched following a series of HHS requests for information soliciting stakeholder feedback on Stark Law burden reduction; Anti-Kickback Statute (AKS) and Civil Monetary Penalties (CMP) refinements; and reforms to the Health Insurance Portability and Accountability Act.

This proposed rule, if accepted in full and enforced, would address any undue regulatory impact and burden of the physician self-referral law as well as providing additional guidance on several key requirements that must often be met in order for physicians and healthcare providers to comply with the Stark Law.  The proposed changes include new exceptions to the Stark Law for certain value-based compensation arrangements between or among physicians, providers, and suppliers. For example, compensation provided to a physician by another healthcare provider generally must be at fair market value.  The proposed rule would provide guidance on how to determine if compensation meets this requirement.

These changes would provide clarity and guidance on a wide range of other technical compliance requirements intended to reduce the administrative burden that drives up costs. These exceptions would allow for certain arrangements under which a physician receives limited remuneration for items or services actually provided by the physician, donations of cybersecurity technology and related services, and amend the existing exception for electronic health records (EHR), items, and services. This rule also provides critically necessary guidance for physicians and health care providers and suppliers whose financial relationships are governed by the Stark statute and other regulations.

Complying with these regulations poses a challenge that requires attorneys and compliance specialists, to evaluate each relationship that has the potential to implicate these laws. The key to compliance with these new exceptions and safe harbors is ensuring that any payments under the arrangement are consistent with the allowances prescribed. Furthermore, since these regulations can be quite challenging, CMS is willing to increase the grace period for non-compliance with certain writing requirements from 60 to 90 days.

Public comments  

CMS is soliciting comments regarding the structure and scope of the proposed exceptions regarding 1) specific compensation arrangements that are permissible under a CMS-sponsored model, program, or other initiative but might not be able to satisfy the requirements of one of the proposed value-based exceptions, and 2) any suggested modifications to the proposals that would bridge any perceived or actual gaps in the protection of the exceptions at proposed § 411.357(aa)(1), (2) and (3). CMS is also interested in comments that address what safeguards would be appropriate to include in such a “gap-filler” exception in order to protect against program or patient abuse. To be assured consideration, comments must be received no later than 5 p.m. on December 31, 2019.