stark update

Recent Changes to the Stark Law June 2, 2016

Presented by: Bill Hoffman, Amy J. McCullough

Agenda 1. SRDP Update

2. New Non-Physician Practitioner Exception

3. New Timeshare Arrangement Exception

4. New Holdover Provision & Fair Market Value Compensation Exception Revision

5. New Signature Grace Period

6. Technical Clarifications:

A. “Signed Writing” Requirements

B. 1-Year Term Requirement

C. Physician-Owned Hospital Requirements

7. Definitional Clarification - “Remuneration” (“Split Bill” Arrangements)

8. “Incident to” Rule Clarification

Overview

CY 2016 Medicare Physician Fee Schedule published on October 30, 2015 (“Final Rule”) included significant changes, including two new exceptions and clarifications to the Stark Law.

Effective: January 1, 2016 (except for definition of “ownership or investment interest”).

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CMS Self-Referral Disclosure Protocol

Update on the SRDP as of Dec. 31, 2015 – The number of submissions: 740

– The number that ended in settlements: 131

– The number withdrawn: 52

– The number being reviewed: 169

– The percentage of disclosures to the SRDP that have been settled or withdrawn: 25%

– The percentage under review: 23%

– The percentage of disclosures settled, withdrawn, or under active review: 48%

Applicability of the 60-day Overpayment Rule – 6 year look-back period for new disclosures after March 14, 2016

– 4 year look-back period for submitted disclosures prior to March 14, 2016 Source: With Stark Changes in Effect, Compliance, Self-Disclosure are a Whole New Ballgame, 25 Report on Medicare Compliance 1, 3 (2016).

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NPP Recruitment Exception: What?

What is the Non-Physician Practitioner (“NPP”) Recruitment Exception?

– 42 C.F.R. § 411.357(x) establishes an exception for remuneration from a hospital/FQHC/RHC to a physician to assist the physician with compensating an NPP to furnish services to patients of the physician’s practice.

NPP Recruitment Exception: Who?

To What Providers does the Exception Apply? NPPs

– Physician Assistants; Nurse Practitioners; Clinical Nurse Specialists; Clinical Psychologists; Clinical Social Workers; Certified Nurse-Midwives

– Not CRNAs

Specialty NPPs?

– Substantially all of (>75%) the services provided by the recruited NPP must be:

• Primary Care Services; and/or

• Mental Health Care Services

NPP Recruitment Exception: Who? (Cont.)

What are Primary Care Services?

– Internal medicine;

– General practice;

– Family practice;

– Geriatric medicine; and

– Pediatric medicine

What are NOT Primary Care Services?

– Specialties (e.g., cardiology, orthopedics, surgery, etc.)

– “Multispecialty” groups?

NPP Recruitment Exception: When?

When can the exception be used? Recruitment of NPP by a physician (and, physician

organization by virtue of SITS (“PO”))

Remuneration provided to physician by the DHS entity (for example, a hospital)

NPP has direct compensation arrangement with physician (or PO)

– Employment, contractual, or other arrangement

– Not ownership

– No staffing company arrangements

Referral of DHS by physician, PO, or NPP

NPP Recruitment Exception: When? (Cont.)

When can the exception be used (cont.)? NPP has not, within 1 year of starting:

– Practiced in geographic service area of the hospital

– Been employed/engaged by physician or PO with a practice site in area served by hospital (regardless of where NPP actually practiced)

Only once every 3 years for the same physician (note: If the physician is part of PO that has more than one nontitular owner, the entire PO is subject to the 3 year limitation)

– Exception:

• Replacing NPP who left within 1 year of starting

• 2 year recruitment assistance limitation is measured from the original NPP’s start date

NPP Recruitment Exception: How?

How should the compensation be structured?

Recruitment Remuneration

– Total compensation provided by

the physician to the NPP may not

exceed FMV for the patient care

services furnished by the NPP to

patients of the physician’s practice

– Hospital’s assistance to the

physician cannot exceed 50% of the NPP’s total

actual compensation, signing bonus, and benefits

(e.g., health insurance, paid leave)

NPP Recruitment Exception: How? (Cont.)

How should the compensation be structured (cont.)?

Recruitment Remuneration (cont.)

– Hospital’s assistance to the physician is limited to the first 2 consecutive years of compensation arrangement between NPP and physician

– May not be determined in a manner that takes into account the volume or value of referrals (referrals of physician, other PO physicians or NPP) or other business generated by the parties


• Other Requirements: 1. Set out in writing

2. Signed by all parties (hospital, physician (PO) and NPP)

3. Not conditioned on referrals

4. May not violate Anti-Kickback Statute or any Federal or State law or regulation governing billing or claims submission

5. 6 year record retention

• Remuneration paid by hospital to physician (PO)

• Remuneration paid by physician (PO) to NPP

• Benefits = health insurance, paid leave and other routine non-case benefits provided to similarly situated employees/contractors of the physician’s practice

6. No unreasonable practice restrictions


How is the exception different from the Physician Recruitment Exception?

No income guarantees permitted

No reimbursement of actual additional incremental expenses (unless included in compensation/benefits)

Limitations (e.g., types of NPPs, frequency of use of exception)

NPP Recruitment Exception: Practical Implications

May help alleviate primary care shortage

–Projected shortage of primary care physicians of 20,400 physicians by 2020

Increase access to primary care and mental health services

Reduce financial burdens on physician practices

Attract new practitioners to hospital’s service area

Source: Department of Health and Human Services, Projecting the Supply and Demand for Primary Care Practitioners Through 2020 (November 2013).

Timeshare Arrangement Exception: What?

What is the Timeshare Arrangement Exception?

– 42 C.F.R. § 411.357(y) establishes

an exception for arrangements

between physician/physician

organization (stand in the shoes)

and a hospital or physician organization (for which the physician is not an owner, employee, or contractor) under which the right to use premises, equipment, personnel, items, supplies, or services for purposes of evaluation and management services (“E/M”) is granted to the licensee.

Timeshare Arrangement Exception: Who?

Who can use the Timeshare Arrangement Exception?

Parties: Must be:

– Hospital or PO; and

– Physician (or PO in whose

shoes the physician stands) who is not an owner, employee, or contractor of the PO

Either may be the licensor or licensee

Other DHS entities such as labs or diagnostic testing facilities cannot be parties to the arrangement

Timeshare Arrangement Exception: When?

When can the Timeshare Arrangement Exception be used?

Purpose: Premises, equipment,

personnel, items, supplies, and

services must be used:

– Predominantly for the provision

of E/M services to patients

– Not available where licensee

solely or primarily furnishes DHS

Timeshare Arrangement Exception: When? (Cont.)

Purpose (cont.):

– Purpose is to provide access to care for beneficiaries – NOT access to DHS income streams or to facilitate intermittent DHS in multiple medical practice sites

– Predominantly is not defined.

– May demonstrate “predominate” use for E/M services through any reasonable, objective, and verifiable means (e.g., volume of patients seen, number of patient encounters, types of CPT codes billed, amount of time spent using premises, equipment, etc.).

Identical E/M and DHS schedules. ◊ Added in final rule ◊

– Purpose is to prevent entities from allowing flexible use of the DHS portion only (i.e., not paying for the E/M portion of the space/equipment/services).


Covers “use” arrangements only - permission to use someone else’s “stuff”

– Does not protect traditional lease arrangements where a possessory leasehold interest is conveyed. ◊ Added in final

rule ◊

– Not for arrangements transferring “control” (“right against the world”)

– The language in the documents/contracts do not control (e.g., lease, license, grant)

– Possible to have “exclusive use” arrangements or arrangements with a term of one year or more that qualify for the exception.


If Equipment is Included:

– Equipment must be located in the same building where the E/M services are furnished. ◊ Added in final rule ◊

– Equipment may not be used to furnish DHS other than those incidental to E/M services furnished at time of patient’s E/M visit.

• e.g., x-rays, rapid strep tests, urine

dipstick tests for pregnancy diagnosis

– Equipment cannot include advanced

imaging, radiation therapy, clinical or

pathology lab equipment (except

CLIA-waived lab tests).

Timeshare Arrangement Exception: How?

How should the compensation be structured? Fee Formula:

– Set in advance

– Fair-market value

– Does not take into account volume/value of

referrals or business between the parties

– Prohibited: Fees based on a percentage of revenue formula or a per-unit of service formula to the extent those fees reflect services provided to patients referred by the party granting permission to use or for services covered by the arrangement to the party to which the permission is granted.

Timeshare Arrangement Exception: How? (Cont.)

Permitted:

– Time-based formulas (e.g., hours, ½ days, days, etc.)

– No minimum amount of time requirement.

– Significant development: CMS recognized that time-based formulas are not at significant risk of fraud & abuse (at least for this exception).

– Flat fee formulas

NOTE: Per-unit/per-click prohibition promulgated under CMS’s Section 1877(b)(4) authority (exceptions that do not pose risk of program or patient abuse).

– See also the Council for Urological Interests v. Burwell, 790 F.3d 212 (D.C. Cir. 2014) decision regarding CMS’s “arbitrary and capricious” interpretation of legislative history.

Timeshare Arrangement Exception: How? (Cont.)

Other Requirements:

1. In writing

2. Signed by the parties

3. Specify the premises, equipment, personnel, items, supplies, and services covered by the arrangement

4. Not be conditioned on the referral of patients by the physician to the hospital or physician organization on the other side of the arrangement

5. Be commercially reasonable even if no referrals were made between the parties

6. Not violate the Anti-Kickback Statute or any other federal or state law/regulation government billing or claims submission

Timeshare Arrangement Exception: How (Cont.)

How is the timeshare arrangement exception different from the Office Space Exception?

No exclusive-use requirement.

No minimum duration of one-year requirement.

– Be careful of short-term arrangements modified frequently to take into account referrals

No requirement to confirm the space does not exceed that which is reasonable/necessary.

No minimum blocks of time.

– Be careful of selective time slots given to physicians based on referrals

Timeshare Arrangement Exception: Practical Implications

Increase access to specialty care, particularly in rural areas

Flexibility afforded to hospitals and physicians who may not require long-term lease arrangements

Exception still very limited

Anti-Kickback and state law still apply

New Holdover Arrangement Rule

The rental of office space and equipment exceptions and the personal service arrangements exception permit holdover arrangements if certain conditions are met.

(42 C.F.R. §§ 411.357(a), (b), (d))

New Holdover Arrangement Rule (Cont.)

Prior Rule: “Holdover” arrangement for up to 6 months if: (1) an arrangement of at least 1 year expires; (2) the arrangement satisfies the requirements of the applicable exception when it expires; and (3) the arrangement continues on the same terms and conditions after its stated expiration.

New Rule: Indefinite “holdover” arrangements permitted if: (1) the arrangement satisfies the requirements of the exception when it expires; (2) the arrangement continues on the same terms and conditions as the immediately preceding arrangement; and (3) the holdover continues to satisfy the requirements of the applicable exception.

New Holdover Arrangement Rule (Cont.)

Safeguards built into indefinite holdovers under the rental of office space and equipment exceptions and personal service arrangements exception

– Amendment to the terms and conditions of the arrangement are not permitted during the holdover

– FMV requirement must be met at all times during the holdover

Application of the Final Rule to current “holdover” arrangements

– Arrangements in a valid holdover under the 6-month holdover provisions on January 1, 2016 may make use of the indefinite holdover provisions if all the requirements of the new holdover provisions are met.

– Arrangements not in a valid holdover under the 6-month holdover provisions may not make use of the indefinite holdover provisions.

Revision to Fair Market Value Compensation Exception

The FMV compensation arrangement exception permits renewals if: (1) the arrangement is renewed on the same terms and conditions; and (2) the renewed arrangement satisfies all the requirements of the exception. (42 C.F.R. § 411.357(I))

– Prior Rule: Arrangements for less than 1 year may be renewed any number of times.

– New Rule: Arrangements of any timeframe, including arrangements for more than 1 year, may be renewed any number of times.

Renewals under the exception are not required to be in writing

– Arrangement can be renewed by course of conduct; and

– Must have documentation establishing the renewed arrangement is on the same terms and conditions as the original arrangement.

New Signature Grace Period

Special rule permits temporary noncompliance with the signature requirements of several compensation arrangement exceptions if the arrangement otherwise fully complies with the applicable exception. (42 C.F.R. § 411.353(g))

– Prior Rule: If the failure to comply with the signature requirement is inadvertent, the parties have 90 days to obtain the required signatures. If the failure to comply is not inadvertent, the parties have 30 days to obtain the required signatures.

– New Rule: All parties have 90 days to obtain required signatures, regardless of whether or not the failure to obtain signatures was inadvertent.

Still very limited - may only be used once every 3 years for the same referring physician.

Technical Clarification: Writing Requirement

Current Rule: Exceptions require the arrangement to be set out in writing including: – Rental of office space and equipment (§ 411.357(a) and (b))

– Bona fide employment relationships (§ 411.357(c))

– Personal service arrangements (§ 411.357(d))

– Physician recruitment (§ 411.357(e))

– Isolated transaction (§ 411.357(f)

– Group practice arrangements (§ 411.357(h))

– Fair market value compensation (§ 411.357(l))

– Indirect compensation arrangement (§ 411.357(p))

– Obstetrical malpractice insurance subsidies (§ 411.357(r))

– Retention payments in underserved areas (§ 411.357(t))

– Electronic prescribing items and services (§ 411.357(v))

– Electronic health records and items and services (§ 411.357(w))

Technical Clarification: Writing Requirement (Cont.)

Final Rule Clarified: Single formal contract is not required to meet “writing” requirement.

– Collection of documents may satisfy the writing requirement

– Collection of documents may include “contemporaneous documents evidencing the course of conduct between the parties”

Standard: Whether the available contemporaneous document would permit a reasonable person to verify compliance with the applicable exception at the time that a referral is made.


Relationship of documents in a collection:

– Must clearly relate to one another

– Must clearly evidence one and the same arrangement between the parties

Signature requirement for a collection of documents:

– Required on a contemporaneous writing document the arrangement

– Must clearly relate to the other document in the collection and the underlying arrangement

– This is still the hardest requirement to meet – Don’t forget about electronic signatures, fax machines, e-mail, etc.

Best Practice: single signed written contract


Examples of a collection of documents to demonstrate compliance with the writing and signature requirement:

– Board meeting minutes or other documents authorizing payments for specified services

– Written communication between the parties, including hard copy and electronic

– Fee schedules for specified services

– Check requests or invoices identifying items or services provided, relevant dates, and/or rate of compensation

– Checks issues for items, services, or rent

– Time sheets documenting services performed

– Call coverage schedules or similar documents providing dates of services to be provided

– Accounts payable or receivable records documenting the date and rate of payment and the reason for payment

Technical Clarification: 1-Year Term

Requirement

Current Rule: Exceptions for the rental of office space, rental of equipment, and personal service arrangements require a term of at least one year. (42 C.F.R. §§ 411.357(a), (b) and (d))

– Note: the FMV exception still does not require a term of 1 year.

Final Rule Clarified: 1-year term requirement is satisfied as long as the arrangement clearly establishes a business relationship that will last for at least one year.

– Formal written contract with an explicit provision identifying the term of the arrangement is not required.

– An arrangement that lasts as a matter of fact for at least a year satisfies the requirement.

Technical Clarification: Public Website and Public Advertising Disclosure Requirement

Current Rule: A physician-owned hospital must disclose on any public website for the hospital and in any public advertising that the hospital is owned or invested in by physicians.

(42 C.F.R. §411.362(b)(3)(ii)(C))

• Final Rule Clarified: Term “Public website for the hospital” does not include: (a) social media websites; (b) Electronic patient payment portals; or (c) Electronic health information exchanges

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(Cont.) Current Rule: A physician-owned hospital must disclose on any public

website for the hospital and in any public advertising that the hospital is owned or invested in by physicians.

(42. C.F.R. §411.362(b)(3)(ii)(C))

Final Rule Clarified: Term “Public advertising for the hospital” defined “as any public communication paid for by the hospital that is primarily intended to persuade individuals to seek care at the hospital.

– Excluded:

• Communications primarily used for recruiting

• Public service announcements

• Community outreach

– Advertising is not limited to a certain type of

communication medium.

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(Cont.) Final Rule Clarified: Report overpayments for failure to comply with the

public website and public advertising disclosure requirement through the SRDP.

Determining period of non-compliance for the SRDP

– Earliest possible date for non-compliance: September 23, 2011

– Period of non-compliance is the duration of the applicable advertisement’s predetermined initial circulation unless the hospital amends the advertisement to satisfy the requirement at an earlier date

• Example: If a hospital pays for an ad in one issue of a monthly magazine and the hospital fails to include the disclosure in the advertisement, the period of non-compliance would likely be the applicable month of circulation, even if the magazine continued to be available in publisher archives, waiting rooms or other public places.

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(Cont.)

Final Rule Clarified: (a) ownership or investment interests held by both referring and non-referring physicians are included when calculating the baseline bona fide investment level and bona fide investment levels thereafter; and (b) definition of “ownership or investment interest” at §411.362(a) defined as a direct (i.e., no intervening persons or entities) or indirect ownership or investment interest (i.e., unbroken chain of ownership or investment interests) in a hospital

Note: Delayed effective date of January 1, 2017.

“Remuneration” Definition Clarification – “Split Bill” Arrangements

Current Rule:

– A “split bill” arrangement occurs when a physician makes use of a DHS entity’s resources (e.g. examination room, nursing personnel, and supplies) to treat the DHS entity’s patients.

– A “split bill” arrangement does not involve remuneration if the DHS entity bills the appropriate payor for the resources and services it provides and the physician bills the payor for his or her professional fees only.

Final Rule Clarified: A “split bill” arrangement does involve remuneration if the DHS entity or the physician bills a non-Medicare payor globally for both the physicians services and the hospitals resources and services.

– This repudiates most of the Kozenske case – but a grant of exclusivity may be still be considered remuneration

“Incident to” Rule Clarification

Current Rule: Medicare regulations permit the billing of services performed by qualified auxiliary personnel under the supervision of a physician or NPP.

Final Rule Clarified: Although the ordering and supervising physician/NPP need not be the same person, the physician/NPP billing for the incident to services must be the same physician/NPP who supervised the auxiliary personnel performing the services.

QUESTIONS?

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Amy J. McCullough [email protected] Atlanta, GA 404.253.6058

William (Bill) Hoffman [email protected] St. Louis, MO 314.552.6816

mailto:[email protected]

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