CMS Finalizes Major Changes and Clarification towards the Stark Law Rules


Because the passage from the Physician Self-Referral Act, also referred to as the “Stark Law,” medical service providers have experienced to understand to operate within and adapt to certain legal and regulating exceptions to be able to boost their companies and have interaction in financial possibilities inside a authorized manner.  Therefore, it’s significant once the Centers for Medicare and State medicaid programs Services (“CMS”) proceed to alter the established regulating plan.  Most lately, CMS incorporated numerous changes towards the Stark Law rules in the 2016 Physician Fee Schedule final rule (the “Final Rule”), printed October 30, 2015, such as the following:

New Exceptions

CMS finalized two new exceptions using the Final Rule. The very first new exception would permit hospitals, Federally Qualified Health Centers and Rural Health Centers to pay for doctors and physician groups for employing certain non-physician practitioners for that provision of primary care or mental health services towards the physician’s or physician group’s patients. The exception covers the recruitment and employing of primary care allied practitioners for example physician assistants, healthcare professionals, clinical nurse specialists, and licensed nurse midwives. In the mental health side, clinical social employees and clinical psychologists can also be engaged when the needs from the exception are satisfied. The exception includes limitations much like individuals relevant towards the exception enabling physician recruitment repayments, but would convey a cap on the amount of time and quantity of the repayments open to practices and doctors for employing these non-physician practitioners.

The 2nd new exception permits “timeshare” plans among doctors, physician groups, and hospitals where one party uses space, equipment, personnel, supplies, etc. supplied by another party on the minimal or as-needed schedule. While not clearly considered “licenses” within the Final Rule, these “timeshare” plans involve periodic permission to make use of certain space, equipment, etc. without the opportunity to exercise exclusive control. Based on the Final Rule, if the entity or physician takes charge of and solely uses the area, equipment, supplies, personnel, etc., a leasing arrangement may end up, and also the space lease exception should be applied rather.

Within this new time share exception, CMS has incorporated certain “program integrity” safeguards. For instance, the exception mandates that all space, equipment, supplies, etc. be specified ahead of time, be utilized on a single schedule, and become “predominantly” employed for the supply of evaluation and management services to patients, not designated health services. Further, the gear that could come under the time share exception is restricted for the reason that advanced diagnostic imaging and clinical laboratory equipment are excluded, the gear should be within the same building because the work place where services are supplied, and utilisation of the equipment should be “tangential” towards the evaluation and management services being furnished in those days. Most of the traditional Stark Law exception elements apply too, like the needs the arrangement be in a commercial sense reasonable and never look at the volume and cost of recommendations or any other business.

Clarification and Increased Flexibility

  • Writing Requirement.  CMS specifies that where an exception requires that something be memorialized in writing, there can be a group of multiple written documents, rather than a single written agreement.  The Final Rule provides examples of what documents may be used to meet the writing requirement, but stresses that any writing or writings compiled to meet the requirement must be signed.
  • “Takes into Account.” CMS states that the “volume and value of referrals” standard has always been the same standard across all exceptions, regardless whether the exception prohibited actions “based on” the volume or value of referrals, or whether the exception prohibited actions that “take in account” the volume or value of referrals.  In the Final Rule, CMS makes the language uniform, using the phrase, “takes into account,” across all exceptions in the regulations.
  • Signature Requirements. The Final Rule affords arrangements not in compliance with signature requirements a grace period of 90 days from when the parties enter into the arrangement to obtain signatures.  The grace period will apply to both intentional and inadvertent failures.  This structure replaces the current regulations permitting a 30-day grace period for intentional failures and 90 days for inadvertent failures.
  • Lease and Personal Services Exceptions. With respect to the current lease and personal services exceptions, CMS made the following updates and clarifications:
    • One Year Requirement: The requirement that arrangements last for one year or more is met as long as the business relationship is one that will clearly last for at least one year, based on the terms of the arrangement.  Any arrangement that in fact lasts one year or more will satisfy the requirement, regardless of whether the term is explicitly written.  For arrangements lasting for a year or more, a provider must be able to show, through contemporaneous writings, that the arrangement met or exceeded the one year period.  If the arrangement is terminated prior to one year, a provider must show that the lease was terminated and that the parties did not enter into a similar arrangement within that same one year period.
    • Holdover Arrangements: These Stark Law exceptions have traditionally permitted “holdover arrangements” for a maximum of six months after the expiration of the agreement.  The Final Rule expands that limitation to permit indefinite holdover arrangements as long as (1) the arrangement complied with the applicable exception at the time of the agreement’s expiration; (2) the holdover arrangement is on the same terms as the expired agreement; and (3) the holdover arrangement continues to meet the elements of the exception.
  • Fair Market Value Exception. With the Final Rule, any arrangements falling under the Fair Market Value exception would be allowed to renew indefinitely, regardless of the length of the initial arrangement, as long as the terms of the arrangement and compensation do not change.  Previously, only arrangements shorter than one year were renewable.  The Fair Market Value exception is intended to protect compensation arrangements that do not fall under other compensation arrangement exceptions.
  • Ownership of Publicly Traded Securities Exception. The exception for ownership of publicly traded securities will now include securities that are available to trade on an electronic stock market, like NASDAQ and FINRA’s OTC quotation system, that maintain daily quotations and require that trades be “standardized and publicly transparent.”
  • Stand in the Shoes. CMS clarifies that physicians who “stand in the shoes” of their practice, either voluntarily or through their ownership and investment interests in the practice, are the only physicians of a practice who may be the authorized signatories when meeting certain exceptions’ signature requirements.  CMS removes the reference to “stands in the shoes” in the locum tenens definition because a locum tenens physician is already considered a “member of a group practice,” and therefore will stand in the shoes of the practice.
  • Physician Ownership in Hospitals: Rural Provider or Hospital Ownership Exceptions.  The Affordable Care Act required that certain disclosures be made by a hospital on its “public website” and in “public advertising of the hospital” when physicians maintained direct or indirect ownership interests in that hospital.  The Final Rule helps to define the details of the disclosure requirement by describing the websites that do not qualify as “public websites” and defining “public advertising for the hospital.”  In addition, the Final Rule advises stakeholders on what language would be sufficient notice to the public of the hospital’s physician ownership.

Finally, the ultimate Rule changes the calculation from the allowable number of physician possession underneath the rural provider or hospital possession exceptions, the “baseline genuine investment level” and also the “bona fide investment level,” to incorporate both non-mentioning and mentioning doctors, including certain non-practicing doctors.  CMS includes a meaning of “ownership or investment interest” that includes both indirect and direct investment interests.  The effective date of these changes is The month of january 1, 2017.

  • Definition of “Remuneration.” The Stark Law regulations originally stated, at 42 C.F.R. 411.351, that it was not “remuneration,” and thus not within the scope of the Stark Law prohibitions, to provide items, devices or supplies used “to collect, transport, process or store specimens for the entity furnishing the items, devices or supplies, or to order or communicate the results of tests or procedures for such entity.”  With the Final Rule, CMS has amended this Section to clarify that there are six qualifying purposes for which the provision of such items and supplies are exempt from the definition of “remuneration,” and if one or more of the six purposes exist, the arrangement would not trigger the Stark Law.  It would continue to be considered “remuneration” to provide such items used for a purpose that is not listed in the regulations.


Most Stark Law changes goes into effect The month of january 1, 2016 however, until December 29, 2015, stakeholders can always discuss the up-to-date listing of HCPCS/CPT codes that the Stark Law will apply at world wide Further, CMS expects to include stakeholder comments produced in the 2016 Physician Fee Schedule Suggested Rule to are accountable to Congress how more integrated, value-based care systems can implicate the Stark Law and whether further Stark Law-related rulemaking is going to be needed to support payment reform.

It’s imperative for all sorts of medical service providers to understand and comprehend the Stark Law and it is relevant exceptions, as CMS may amend them every so often.