CMS made impactful changes to the Federal physician self-referral law’s (i.e., Stark Law’s) regulations in its Final Rule that were effective January 19, 2021 (with the exception of the changes to 42 C.F.R. § 411.352(i) that are effective January 1, 2022). Although lengthy (190 pages/3-column format), the Final Rule is worth the read with multiple clarifications and revisions to the dense regulations.
In connection with the first part of our key takeaways, each reader will find gems in the Final Rule that are impactful, but we note particularly the following key changes, clarification, and discussion:
The fair market value (FMV) definition was refined, breaking out the general definition, the definition related to rental of equipment, and the definition related to the rental of office space. The general market value definition was separated from the FMV definition, addressing asset purchases, compensation for services and rental of equipment or office space.
CMS revised the group practice provisions related to overall profits, and has granted practices a year to comply.
The period of disallowance provisions are removed from the regulations, and there is a new special rule for reconciling compensation arrangements, allowing parties to identify administrative and operational errors that result in payment discrepancies in an ongoing compensation arrangement and fix them.
This ability to fix ongoing arrangements encourages active compliance programs – specifically, auditing and monitoring – and is incredibly helpful to DHS entities who can fix Stark Law issues by reconciliation (e.g., repayment by physicians or offsetting future payments).
CMS has included an affirmative requirement under many of the exceptions that the compensation arrangement meet the conditions of the special rule at § 411.354(d)(4) in the following exceptions: § 411.357(c) for bona fide employment relationships, § 411.357(d)(1) for personal service arrangements, § 411.357(d)(2) for physician incentive plans, § 411.357(e) for academic medical centers, § 411.357(h) for group practice arrangements with a hospital, § 411.357(l) for fair market value compensation, § 411.357(p) for indirect compensation arrangements, and § 411.357(z) for limited remuneration to a physician. The requirement states that if a physician’s compensation is conditioned on the physician’s referrals to a particular provider, practitioner or supplier, all of the following conditions must be met:
CMS clarified that the exclusive use provision in the rental exceptions relates only to the lessor who may not use the office space or equipment. As such, a lessor may have multiple lessees using the rented space or equipment at the same time, and those lessees can sublease, as long as the other requirements of the exception are met.
CMS revised the fair market value exception to permit parties to protect arrangements for the rental or lease of office space (adding the prohibition on percentage and per-click leases). The FMV exception does not have a one-year term requirement, so short-term arrangements are permissible; however, parties will be allowed only one lease arrangement during the course of a year. Parties can have indefinite renewals under the same terms. (Id. at 77,605)
In evaluating your financial arrangements, we recommend that you also consider the changes to the Federal anti-kickback statute safe harbors that were also effective on January 19, 2021. See 85 Fed. Reg. 77,684 (OIG Final Rule Dec. 2, 2020). Be sure not to miss our additional comments from Part 1.
Foley is here to help you address the short- and long-term impacts in the wake of regulatory changes. We have the resources to help you navigate these and other important legal considerations related to business operations and industry-specific issues. Please reach out to Jana Kolarik, your Foley relationship partner, or to our Health Care Practice Group with any questions.
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