Stark Law Modifications Finally Published

November 20, 2015 Alerts and Newsletters

On November 16, 2015, the Centers for Medicare & Medicaid Services (CMS) published the final regulations (the Final Rule) for a number of modifications to the Stark Law. The new regulations, most of which will become effective on January 1, 2016, include two additional exceptions and a number of clarifications and refined definitions. This Alert provides a high-level summary of a number of the most notable changes, as well as practical implications for health care providers navigating financial relationships subject to the Stark Law.

New Exceptions

The Final Rule includes two new exceptions to the general prohibition on a physician's referrals of certain designated health services to an entity with which the physician has a financial relationship.

Recruiting Non-physician Practitioners to Hospitals, FQHCs, and RHCs. In recognition of the sweeping changes to the health care delivery and payment systems in recent years, CMS created an exception for the recruitment of non-physician practitioners (NPPs). The Final Rule includes a new exception that will permit certain payments by hospitals, federally qualified health centers (FQHCs) and rural health clinics (RHCs) to induce NPPs to relocate to the particular service area, provided other applicable requirements are met.

Timeshare Arrangements. Also in recognition of the changes to the health care delivery system, and the importance of ensuring access to services in less-populated and underserved areas, the Final Rule includes a new exception that permits certain timeshare arrangements for the use of office space, equipment, personnel, items, supplies or services, provided other applicable requirements are met.

Clarifications and Modifications to Definitions

Writing Requirement. A number of Stark exceptions require an agreement or arrangement to be set out in writing. The Final Rule clarifies that this requirement does not mean that there must be one document that includes all relevant terms; instead, the requirement can be met through a combination of any number of different documents that together contain all of the necessary terms.

Term Requirement. The Final Rule also clarifies that exceptions that require a term of at least one year can be met even if none of the relevant documents includes a term provision specifying a one-year term. The requirement can be satisfied if an arrangement is, in fact, in place for at least one year.

Holdover Arrangements. The Final Rule also extends the permitted holdover period for exceptions that currently permit a six-month holdover period after the expiration of a contract. The terms of the Final Rule now permit an indefinite holdover period. The holdover is only allowed if the terms and conditions of the continuing relationship remain the same as they were in the original arrangement and otherwise satisfy the applicable requirements of the exception.

Signature Requirement. Currently, a number of the compensation arrangement exceptions require the signatures of all parties to an arrangement, but allow for temporary noncompliance (90 days for inadvertent noncompliance and 30 days if noncompliance is not inadvertent). The Final Rule lengthens the shorter time period, now permitting a failure to meet the signature requirement to be cured within 90 days, regardless of whether it was inadvertent.

FQHC and RHC Geographic Area Defined. The Final Rule includes a definition of geographic area applicable to FQHCs and RHCs when recruiting physicians to relocate. The geographic area into which FQHCs and RHCs are permitted to recruit a physician is defined as the lowest number of contiguous or noncontiguous zip codes from which either the FQHC or RHC draws at least 90 percent of its patients, as determined on an encounter basis.

Remuneration Definition Revised. The Final Rule revises the definition of remuneration to specifically exclude the provision of an item, device, or supply used for collecting, transporting, processing, or storing specimens or for ordering tests or procedures or communicating the results of the tests or procedures. The provision of an item for any one of the six purposes enumerated in the statute, and no other purpose, is excluded from the definition of remuneration. In addition, CMS clarified that in a "split bill" arrangement where the DHS entity bills for facility services and the physician bills for the professional fee only, there is no remuneration between the parties.

Practical Implications

In addition to complying with the new changes to the Stark Law, entities should understand that CMS considers many aspects of the Final Rule to be clarifications, not changes, which means that the particular requirements are not prospective in nature and should be taken into account with respect to existing financial relationships in order to ensure compliance with the Stark Law requirements. Health care providers should also take note of the following:

  • The writing requirement can be met through a number of documents but state law contract principles do not determine compliance with the writing requirement.
  • Split-billing relationships between providers are allowed.
  • Entities have 90 days to obtain signatures on written arrangements subject to the Stark Law.
  • Indefinite holdover periods are acceptable provided the terms of the arrangement are the same.
  • Timeshare arrangements are allowed.

If you have any questions, please contact Kate G. Healy, Riikka E. Morrill, or another member of our Health Care Team.

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This communication is intended for general information purposes and as a service to clients and friends of Verrill Dana, LLP. This publication, which may be considered advertising under the ethical rules of certain jurisdictions, should not be construed as legal advice or a legal opinion on any specific facts or circumstances, nor does it create attorney-client privilege.

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