CMS Finalizes Changes to Stark Law

For physicians, changes an important pathway to compliance
By Clay J. Countryman, Esq.

THE CENTERS for Medicare and Medicaid Services (CMS) recently finalized two important changes and issued other clarifications to the Stark Law regulations in the 2019 Physician Fee Schedule Final Rule. CMS stated that these regulatory changes were to address similar amendments by the Bipartisan Budget Act of 2018.

The changes are important to physician practices because they address compliance with the “writing and signature” requirements in the compensation exceptions to the Stark Law. Physicians generally must satisfy a compensation exception to the Stark Law in several different types of arrangements, such as professional service agreements, call coverage agreements, and medical director agreements.

The clarifications also address how arrangements that initially began without a signed agreement may still meet the signature requirement of an applicable exception in a special rule in the Stark Law regulations involving temporary noncompliance with the signature requirements in many exceptions to the Stark Law.

Financial relationships between physicians and other entities or providers that implicate the Stark Law include several types of compensation arrangements and ownership/investment interests, such as employment, group practice arrangements with hospitals, and space and equipment rental arrangements. The Stark Law contains exceptions for these types of physician compensation arrangements that generally include a requirement that an arrangement be in writing and signed by the parties.

The “In Writing” Requirement
Physicians face significant compliance challenges to meet a Stark Law exception if they cannot locate or do not have a single agreement signed by all parties to an arrangement that created a financial relationship under the Stark Law. In recent years, CMS’ policy has been to allow various forms of written documentation to satisfy the “in writing” requirement in the Stark Law exceptions for compensation arrangements.

The BBA of 2018 added a new provision to the Stark Law statute that provides that the writing requirement for a compensation arrangement may be satisfied by “a collection of documents, including contemporaneous documents evidencing the course of conduct between the parties.” In the 2019 Medicare Final Physician Fee Rule, CMS amended the Stark Law regulations to include this same provision permitting a “collection of contemporaneous documents to satisfy the “written requirement.”

More Flexibility
Several Stark Law exceptions for compensation
arrangements require that the arrangement be signed by the parties. The Stark Law regulations contain a special rule for certain arrangements that meet all the requirements of an applicable exception except for the signature requirement of an exception. Under this special rule, if an entity is temporarily in noncompliance with the signature requirement, CMS allows an entity to obtain the necessary signatures within 90 days of the date of noncompliance without violating the Stark Law physician self-referral prohibition. The parties receive retroactive protection under the exception, regardless of whether any referrals are made or compensation is paid during the 90-day period. An entity is limited to taking advantage of this only once every three years with respect to the same referring physician.

The BBA of 2018 confirmed the ability of providers to use the 90-day period to correct noncompliance with any signature requirements. However, it also added flexibility to meeting the signature requirement. These changes amended the Stark Law regulations to include the following flexibility:
• The temporary signature noncompliance rule is no longer limited to certain exceptions.
• The regulations no longer limit an entity from using the temporary noncompliance with the signature rule to once every three years with respect to the same referring physician.
• The regulations no longer refer to the occurrence of referrals or the payment of compensation during the 90-day window.

Indefinite Holdover Provisions
Another important clarification is that CMS is not making any changes to the provisions in the Stark Law allowing arrangements to continue indefinitely beyond the expiration of a written agreement. In 2016 CMS had revised the Stark Law regulations to specifically permit a lease arrangement or personal service arrangement to continue indefinitely beyond the stated expiration of the written documentation describing the arrangement under certain circumstances. The new statutory holdover provisions in the BBA of 2018 effectively mirror the existing regulatory provisions in the Stark Law.

Bottom line: these changes and clarifications are an important pathway to compliance. However, the exceptions affected should always be reviewed to consider any limitations on their use to financial relationships by physicians and their group practices.

Clay J. Countryman is a partner with Breazeale, Sachse & Wilson, LLP, in Baton Rouge, La. Contact him at Clay.Countryman@bswllp.com.