(1) The document summarizes key aspects of the Stark Law, including the general prohibition on physician self-referrals and exceptions.
(2) It outlines penalties for Stark Law violations including denial of payment, civil monetary penalties, and potential exclusion from federal programs.
(3) Recent changes to the Stark Law are highlighted, such as loosened writing requirements and exceptions allowing hospitals to provide assistance to physicians employing non-physician practitioners.
Law360 - How Duty Of Candor Figures In USPTO AI Ethics Guidance
"The Stark Law 2019: Good Things on the Horizon for Providers"
1. The Stark Law 2019:
Good Things On The
Horizon For Providers
Presented by Sarah Coyne and Jon Kammerzelt
The Stark Law
Health Care Compliance Association
June 6, 2019
3. • Prohibition of certain referrals
– [I]f a physician (or an immediate family member of such physician)
has a financial relationship with an entity …, then—
• (A) the physician may not make a referral to the entity for the furnishing of
designated health services for which payment otherwise may be made under
Medicare, and
• (B) the entity may not present or cause to be presented a claim for payment by
Medicare to any individual, third party payor, or other entity for designated
health services furnished pursuant to a prohibited referral.
• UNLESS AN EXCEPTION APPLIES!
The General Prohibition
4. • Good News: No Criminal Penalties
• Bad News: Substantial Civil Penalties
– Denial/Repayment of Prohibited Claims
– Civil Monetary Penalties ($15,000/claim for knowing; $100,000 for circumvention)
– Potential exclusion from Federal Programs (Medicare/Medicaid)
– Potential predicate for False Claims Act
• Strict Liability – no bad intent needed
Stark Penalties
5. • The "Period of Disallowance":
• The period during which a compensation arrangement is out of compliance with
Stark.
• Period of disallowance continues until:
– The arrangement is brought into compliance.
– Any excess compensation is repaid by physician(s).
– The hospital repays Medicare or discloses under SRDP.
• The period of disallowance begins at the time the relationship fails to satisfy the
requirements of an exception.
The Period Of Disallowance
6. (1) If a PHYSICIAN (or an IMMEDIATE FAMILY MEMBER of such
physician)
(2) Has a FINANCIAL RELATIONSHIP with an entity
(3) The physician may not makes a REFERRAL
(4) To the ENTITY
(5) For the furnishing of DHS
(6) Payable by MEDICARE (or maybe Medicaid)
Key Terms With Very Specific Meanings
7. • Physician:
– Doctor of Medicine or Osteopathy
– Doctor of Dental Surgery (DDS) or Dental Medicine (DMD)
– Podiatrist
– Doctor of Optometry
– Chiropractor
Physician/Immediate Family Member
8. • Immediate family member:
– Husband or wife (including same-sex spouse)
– Birth or adoptive parent
– Child or sibling
– Step relative (parent, child, brother, sister)
– In-laws (father/mother, son/daughter, brother/ sister)
– Grandparent or grandchild and spouse of a grandparent or
grandchild
Physician/ Immediate Family Member
9. • An ownership or investment interest or a compensation arrangement,
direct or indirect.
(A) Direct ownership or investment interest in an entity.
(B) Indirect ownership or investment interest in an entity.
(C) Direct compensation arrangement with an entity.
(D) Indirect compensation arrangement with an entity.
Financial Relationship
10. – Clinical laboratory services
– Physical therapy services
– Occupational therapy services
– Outpatient speech-language pathology
services
– Radiology and certain other imaging
services
– Radiation therapy services and supplies
– Durable medical equipment and supplies
– Parenteral and enteral nutrients, equipment,
and supplies
– Prosthetics, orthotics, and prosthetic devices
and supplies
– Home health services
– Outpatient prescription drugs
– Inpatient and outpatient hospital services
Designated Health Services
The following items or services are DHS:
11. • NOT DHS:
– Most physician services
– Services paid under SNF PPS
– Services paid under the ASC payment system
– Services paid under the ESRD composite rate
– Services that are specifically carved out from the definitions of certain types of DHS
• Pass-through items or supplies during ASC procedure
• Radiological procedures to confirm placement of an implant during a non-radiological
procedure
• CT scans for purposes of radiation therapy guidance
– Lithotripsy
Designated Health Services (cont.)
12. • With certain exceptions, a referral is BROADLY defined to mean:
– Any indication by a physician (in any form) that s/he believes the DHS is medically
necessary.
– Prohibited referrals are for DHS that are covered by Medicare.
– Also includes ANTICIPATED referrals.
– Includes a request for consultation with another physician, any test or procedure.
Referral
13. • The regulatory prohibition on self-referral can be IMPUTED to one
doctor if another doctor in the same group makes a referral.
• Prohibited referrals, even if made through a conduit, are still illegal and
covered by Stark.
• Example: referral to a skilled nursing facility (SNF) by a physician who
could reasonably expect that the physical therapy company owned by
the physician and under contract with the SNF would furnish PT to the
referred Medicare patient.
Indirect Referral
14. • A referral by a physician for DHS that is performed or provided by the
referring physician is NOT a referral.
• Includes equipment/ supplies IF the referring physician is enrolled in
Medicare as a supplier as well as a provider.
Referral – Personally Performed DHS
15. • An “entity” is the person or organization that “furnishes” DHS and thus,
subject to the Stark Law, entity means:
• A physician’s medical practice
• A practice of multiple physicians
• Any organization (or person) furnishing DHS
• Furnishing DHS means – performing the DHS or presenting the claim to
Medicare for DHS even if the right to payment has been reassigned
• Examples: Hospitals, Group Practices, Clinical Labs
Entity
17. • The Stark Law has over thirty exceptions that may permit an otherwise
prohibited referral.
• Once you determine that the Stark Law applies, you start looking for an
applicable exception.
Exceptions Generally
18. The Stark Law Exceptions
Exceptions for Ownership/
Investment Interests Only
Exceptions for
Compensation Arrangements Only
We will go through each type…
19. • Nine exceptions:
(1) Physician Services (intra-group)
(2) In-office Ancillary Services (more coming)
(3) Prepaid plans (essentially for HMOs)
(4) Academic Medical Centers (faculty physicians)
(5) Implants furnished by an ASC (cochlear, intraocular, etc.)
(6) EPO and other dialysis-related drugs
(7) Preventive screening tests, immunizations, and vaccines
(8) Eyeglasses and contact lenses following cataract surgery
(9) Intra-family members in rural areas
Overall Exceptions (Apply To Ownership
And Compensation)
20. • Though publicly-traded securities
• Though mutual funds
• In a rural area
• In a “whole” hospital
• In a hospital located in Puerto Rico
Ownership/ Investment Exceptions
(Do Not Apply To Compensation)
21. • A physician’s ownership or investment interest in an entity located in a
rural area that furnishes “substantially all” of the DHS to individuals
residing in the rural area will not be a prohibited ownership/ investment
interest (physician may refer to it).
• To qualify as a “rural provider,” substantially all, (at least 75%) of the
DHS that are furnished by the entity must be furnished to individuals
who reside in a rural area.
• “Rural area” is any area outside of a Metropolitan Statistical Area as
defined by OMB.
Exception: Ownership Interest In A “Rural Provider.”
22. • The following are all of the Stark Law exceptions that apply to
compensation arrangements:
(1) Rental of office space
(2) Rental of equipment
(3) Bona fide employment relationships
(4) Personal service arrangements
(5) Remuneration provided by a hospital to a physician if such remuneration does not
relate to the provision of designated health services
(6) Physician recruitment
Compensation Exceptions (Do Not Apply To
Ownership/Investment)
23. • Stark Law exceptions that apply to compensation arrangements (cont.):
(7) Isolated transactions
(8) Group practice arrangements with a hospital
(9) Payments by a physician for items and services
(10) Charitable donations by a physician
(11) Nonmonetary compensation
(12) Fair market value compensation
(13) Medical staff incidental benefits
(14) Risk-sharing arrangements
(15) Compliance training
Compensation Exceptions (Do Not Apply To
Ownership/Investment)
24. • Stark Law exceptions that apply to compensation arrangements (cont.):
(16) Referral services
(17) Obstetrical malpractice insurance subsidies
(18) Professional courtesy
(19) Retention payments in underserved areas
(20) Community-wide health information systems
(21) Electronic prescribing items and services
(22) Electronic health records items and services
Compensation Exceptions (Do Not Apply To
Ownership/Investment)
25. • Several concepts show up in most exceptions applicable to
compensation arrangements.
– Fair Market Value
– Prohibition on varying with the volume or value of referrals
– Compensation set in advance
– Commercially reasonable
– Signature
– Conditioning compensation on referrals
Concepts Common To Many Exceptions To The
Prohibition On Compensation
26. • Value in arms-length transactions consistent with the general market
value
– The price that is the result of bona fide bargaining between well informed parties.
• Many resources to help determine fair market value
– Market comparables
– National benchmark sources (e.g., MGMA, Sullivan Cotter)
– Valuation experts (e.g., real estate appraisers)
– None of these are foolproof – the government can disagree
Fair Market Value
27. • Many exceptions contain a prohibition on the compensation varying with
the volume or value of any referrals or other business generated
between the parties.
• Two escape hatches (both have limits):
– Profit sharing
– Productivity bonuses
Prohibition On Variance With The Volume Or Value
Of Referrals Or Other Business
28. • Compensation is “set in advance” if:
– The aggregate compensation, a time-based or per-unit of service-based (whether
per-use or per-service) amount, or a specific formula for calculating the
compensation is set in an agreement between the parties before the furnishing of
the items or services for which the compensation is to be paid.
– The formula for determining the compensation must be set forth in sufficient detail,
and the formula may not be changed or modified during the course of the
agreement in any manner that takes into account the volume or value of referrals
by the referring physician.
COMPENSATION “Set In Advance”
29. • Academic medical centers (this exception also applies to
ownership/investment interests)
• Rental of office space
• Rental of equipment
• Personal service arrangements
• Fair market value compensation
Exceptions Requiring That Compensation
Be Set In Advance
30. • Numerous exceptions require that the remuneration paid under an
agreement be commercially reasonable even if there were no referrals
between the parties.
• Would make commercial sense.
• Consistent with business purpose/ strategic goals of the parties.
• Could not be performed by non-physician providers.
• Service providers are qualified – trained, experienced, worth the money
being paid.
• Duties and responsibilities are reasonable both medically and from a
business perspective.
• Other similarly situated entities would do the same thing.
Commercially Reasonable
31. Office/ Equipment Lease
• Writing
• Reasonable and necessary
• Used exclusively by lessee when used by lessee
• Term at least one year
• Rental set in advance, consistent with Fair Market Value, doesn’t vary
with the value/ volume of referrals
• Commercially reasonable
• If this exception doesn’t fit, try the Fair Market Value exception
32. • Broad, commonly used exception
• No written agreement required!
• Employment is for identifiable services
• Compensation is Fair Market Value and not determined in a manner that
takes into account the volume or value of referrals
• Commercially reasonable
Bona Fide Employment Arrangement
33. • Set out in writing, signed by the parties, specifies the services covered
by the arrangement, and is for a term of at least one year.
• The arrangement covers all of the services to be furnished by the
physician (or an immediate family member of the physician) to the entity.
– Requirement met if all separate arrangements between the entity and the physician
and the entity and any family members incorporate each other by reference or if
they cross-reference a master list of contracts.
– Master list must be that is maintained and updated centrally and available for
review by the Secretary of HHS upon request.
– The master list must be maintained in a manner that preserves the historical record
of contracts.
Personal Service Arrangements
34. • The aggregate services contracted do not exceed those that are
reasonable and necessary for the legitimate business purposes of the
arrangement.
• The compensation to be paid over the term is set in advance in the
initial agreement in sufficient detail so that it can be objectively verified,
does not exceed fair market value, and is not determined in a manner
that takes into account the volume or value of any referrals or other
business generated between the parties.
• The services to be performed under the arrangement do not involve the
counseling or promotion of a business arrangement or other activity that
violates any state or federal law.
Personal Service Arrangements (cont.)
35. • Compensation from an entity in the form of items or services (not
including cash or cash equivalents) that does not exceed an aggregate
of $416 per year, if all of the following conditions are satisfied:
– The compensation is not determined in any manner that takes into account the
volume or value of referrals or other business generated by the referring physician.
– The compensation may not be solicited by the physician or the physician’s practice
(including employees and staff members).
– The compensation arrangement does not violate the Anti-Kickback Statute or any
federal or state law or regulation governing billing or claims submission.
Nonmonetary Compensation
36. • Where an entity has inadvertently provided non-monetary compensation
to a physician in excess of the $416 limit, such compensation is deemed
to be within the $416 limit if:
– The value of the excess non-monetary compensation is no more than 50% of the
$416 limit; and
– The physician returns to the entity the excess non-monetary compensation (or an
amount equal to the value of the excess non-monetary compensation) by the end
of the calendar year in which the excess non-monetary compensation was received
or within 180 consecutive calendar days following the date the excess non-
monetary compensation was received by the physician, whichever is earlier.
Nonmonetary Compensation (cont.)
37. • Hospitals may provide their medical staff with low value items and
services.
• Limit for 2019 is $35.
• Covers doughnuts during the medical staff meetings, etc.
• Must be offered to all members of the medical staff in that specialty.
• Must occur on the hospital campus.
Medical Staff Incidental Benefits Exception
38. • FMV payments that don’t change with referral patterns
• Signed, written contract
• At least one year term
• Commercially reasonable deal
• Terms that are “set in advance” (no retroactive deals)
• Use as a last resort
Fair Market Value Compensation
40. The Big Decision When Stark Law Violation Is
Identified
• 60-day “clock” starts once overpayment is “identified,” so within 60 days
the hospital must either:
– Guess: Pay back the Medicare contractor; or
– Self-disclose pursuant to the Self-Referral Disclosure Program (SRDP).
• Identified means quantified.
• What hospital boards usually want to do? (Hint: It’s neither of those.)
• Nature and extent of overpayment will factor into disclosure decision.
41. • The SRDP was established by the ACA.
• The SRDP is essentially a process to enable providers to self-disclose
actual or potential violations of Stark (only).
• SRDP lists factors that CMS may consider in reducing the amounts
owed by a disclosing party, but states: “CMS is not obligated to reduce
any amounts due and owing.”
• Benefits of self-disclosure:
– Possibility of reduced penalties.
– Avoidance of exclusion as part of a settlement.
– Potential protection from a viable qui tam whistleblower action.
Self-Referral Disclosure Protocol
43. • Hospitals, Federally Qualified Health Clinics and Rural Health Clinics
may provide financial assistance to physicians/ groups to employ non-
physician practitioners (with caveats).
• Certain time block arrangements for shared equipment that were
prohibited may involve payments from hospitals to physicians or vice
versa (with caveats).
• “Takes into account” will be used instead of “based on” the volume or
value of referrals – takes away an attenuated legal argument.
• “In writing” can mean an assembly of documents, emails.
• A few other things.
2016 Statutory Changes (Regs in 2019)
44. • Most Stark exceptions require the arrangement to be in a signed writing.
• In 2016, CMS loosened up this requirement such that lack of a "formal
contract" will not be a problem provided that there are contemporaneous
documents evidencing the course of conduct.
• A collection of documents is okay.
Writing Requirement (Softened)
45. • Emails or handwritten communications between the parties.
• Fee schedules for specified services.
• Check requests or invoices identifying services, dates and
compensation.
• Call coverage schedules (or similar) evidencing service coverage.
• Accounts payable or check records for specified items or services.
Examples Of Appropriate Documents
Evidencing A Writing
46. • Signature is required on a contemporaneous writing documenting the
arrangement.
• A signed writing must clearly relate to the other documents in a
collection and to the underlying arrangement.
• Lack of signature okay for 90 days now, regardless of whether it was
"inadvertent" (every 3 years – per physician).
Writing - Signature Requirements
47. • A document generated or produced after a referral is made does not
provide a basis for that (previous) referral.
• If the only documents in existence were created after an arrangement
was created, the parties will not be able to show that the compensation
was "set in advance."
Writing - Timing
48. • Used to be required to be IN the contract for certain
exceptions (space/ equipment lease, personal services).
• Now if there is a collection of documents evidencing that it did
last at least one year, that is sufficient.
One Year Term (Softened)
49. • Had been limited to 6 months where an expired arrangement
still satisfied all elements (lease and personal service).
• Now unlimited in time.
• Lots of picky nuances.
Indefinite Holdover
50. • For FQHCs, RHCs and hospitals, there is a Stark Law exception for
payment to a physician to assist the physician with compensating a non-
physician practitioner.
• PA, NP, CNS, CNM, clinical social worker, clinical psychologist.
• NPP provides primary care or mental health services (at least 75%).
• Use only once every 3 years per physician.
Exception – Assistance To Compensate
A Nonphysician Practitioner
51. • Physicians and hospitals may share space, equipment and services e.g.
to visiting specialists on a non-exclusive "as-needed" basis without
violating Stark (rather than traditional formal fixed lease where
"leasehold interest" is conveyed).
• Services are primarily for evaluation and management.
• No per click or percentage formulas.
• Lots of picky requirements.
Exception – Timeshare Arrangements
52. • CMS solicited commentary on potential amendments to Stark
Law in 2018
• Eliminate obstacles to:
– Value-based reimbursement
– Coordination of care
• CMS sought information in a number of areas....
CMS Request For Information
53. • Existing or potential arrangements involving alternative payment models
and novel financial arrangements.
• Do you think that these arrangements fit squarely into current
exceptions?
– Who are the parties?
– Who bears risk?
– What is the scope of items or services/ timeframe?
– Does this arrangement further alternative payment models/ novel financial
arrangements?
CMS RFI – Existing Or Potential Arrangements
54. • For the arrangements involving novel financial arrangements/ alternative
payment models (APMs) that DO NOT fit into current exceptions, what
additional exceptions are needed?
– For accountable care organization models?
– For bundled payment models?
– For two sided risk models in a fee for service environment?
– For other payment models not listed?
CMS RFI – What Exceptions Are Needed For APMs?
55. • What additional exceptions (if any) are needed to protect financial
arrangements (regardless of payment model) that involve integration
and coordination of care?
CMS RFI – What Exceptions Are Necessary For
Clinical Integration?
56. • Risk-sharing arrangements at 42 CFR 411.357(n)
• Physician Incentive Plan special rule for Personal Service Arrangements
at 42 CFR 411.357(d)
CMS RFI – How Useful Are Certain Exceptions/
Rules?
57. • Alternative Payment Model
• Care coordination
• Clinical Integration
• Financial Integration
• Risk/ Risk-sharing
• Physician Incentive Program
• Gainsharing
• Health Plan/ Health System
• Enrollee
CMS RFI - Definitions
58. • What should the definition of "commercial reasonableness"
be in the context of the exceptions to the Stark Law?
• Approaches to modifying the definition of "Fair Market Value"?
CMS RFI – Commercial Reasonableness/ Fair
Market Value
59. • Generally – how does this play out?
• In the context of APMs and novel financial arrangements, how
does this play out?
CMS RFI – "Volume Or Value Of Referrals"
60. • What barriers exist now to qualifying as a group practice?
• Significant for physician groups for In-Office Ancillary Services exception
(allowing physicians to share and jointly own resources and space).
CMS RFI – Group Practice
61. • How could CMS interpret this exception to cover a broader array of
arrangements? 42 CFR 411.357(g)
• Stark applies to relationships unrelated to the DHS e.g. rent,
compensation for non-medical services or items, housing or travel
except for "certain arrangements with hospitals."
– If remuneration does not relate directly or indirectly.
– Wholly unrelated to the furnishing of DHS.
– Not take into account volume/ value of referrals.
CMS RFI – Remuneration Unrelated To DHS
62. • Would it be important for referring physicians in your arrangement(s) to
be transparent with patients about:
– Financial relationships of that physician?
– Price transparency?
– Anything else?
• How could CMS design a model within the Stark Law to ensure
transparency and effectively preclude physicians from making medical
decisions based on financial self-interest?
CMS RFI - Transparency
63. • What are the costs of compliance?
• How effective is the Stark Law at achieving its goal and
should CMS be measuring this? (If so, how?)
CMS RFI – Cost And Effectiveness Of Stark Law
64. • AHA (last year, in response to a CMS request for comments) urged
CMS to create new compensation exceptions.
• Hospitals and physicians should be able to coordinate care in the
interest of improving patient outcomes without worrying about strict
liability.
American Hospital Association Response To RFI
65. • Accommodate flexibility in payment models – encourage innovation in
financial structure of arrangements that streamlines care (and highlights
value over volume).
• Stakeholders advocate for new “value-based” exceptions to the Stark
Law that would permit physicians to be compensated based on the
“value or volume” of referred DHS.
• Alternative payment models that would provide appropriate incentives
that involve shared risks or shared savings.
Driving Force Behind Contemplated Changes
66. • CMS Administrator Seema Verma hinted at some of the coming
changes to the agency’s Stark Law regulations.
• Some of the changes include:
– Clarifying the regulatory definitions of volume or value.
– Commercial reasonableness and Fair Market Value.
– Lack of signature, incorrect dates or other areas of technical noncompliance.
– Updating the regulation to address a world in which there are cybersecurity and
electronic health records requirements.
– "This will represent the most significant changes to the Stark law since its
inception. It is our hope that these changes will help spur better care coordination
and help support our work to remove barriers to innovation while continuing to
provide appropriate safeguards for our programs.”
Secretary Verma Remarks In 2019
67. • Medicare Coordination Improvement Act of 2017 – waivers for violations
in association with participation in the MSSP.
• the “Stark Administrative Simplification Act of 2017,” proposes an
alternative protocol to the Stark self-referral disclosure protocol (SRDP)
for inadvertent technical noncompliance (including, for example,
compensation arrangements with an inadvertent missing signature) with
the Stark Law and reduced civil monetary penalties for disclosures
made pursuant to this alternative protocol.
Pending Legislation That Could Affect Stark
69. • Above FMV transactions -- windfalls to physician
• Commercially unreasonable deals
• Undocumented arrangements
• Expired or unsigned contracts
• Compensation tied to referrals (per-click deals; % compensation)
• Excessive recruitment deals to existing groups
• Deals/payments that don’t match paperwork
• Expensive gifts and perks to medical staff docs
• Retroactive contracts or price adjustments
Common Stark Violations
70. • Watch out for “exclusive use” requirements in space and equipment
lease exceptions
• Anything billed by hospital becomes DHS
• Contracts with no auto-renewal clause
• Long term contracts that do not adjust for FMV changing over time
• Physicians asking for stuff
Stark Traps
71. • Financial relationship does not need to relate to DHS to trigger Stark
• Docs with multiple relations - each must meet an exception
• All elements of exception must be met
• No exception for patient convenience or de minimis payments
• “I didn’t know” or “I didn’t mean to” is not a defense (strict liability)
Exception Tips
72. • Is there a financial relationship between the referring physician and DHS
Entity?
– Ownership or compensation
– Direct or indirect
– Relationship with doc’s family members also count
– In any direction
• Is there a referral for DHS?
• Is the DHS reimbursable by Medicare/Medical Assistance?
• Does the relationship meet one of the exceptions?
Summary: How To Reason Through Stark
73. • Six year look back
• Detailed submission required – with compliant contracts and estimated
overpayment
• CMS calculates repayment amount
• No appeal; open house to regulators
• Hope, but no promise of reduced repayment
• Clearly stops 60 day clock
Self-Referral Disclosure Protocol
74. • Deal with patient copayments
• Assess Medicaid repayment
• Think about AKS violations
• Think about IRS implications
• Get everything compliant going forward (the contracts already should be
there by the time of SRDP)
• Communicate with accountants relating to audited financials/ cost report
After Settlement, You Still Have More To Do!