The CMS' proposed changes to regulations governing financial relationships between physicians and other providers might make life easier for them in many areas but could also raise questions in others.
The CMS released the proposed changes Wednesday as part of a draft update to the Medicare Physician Fee Schedule for 2016, which addresses a number of topics including the Stark law. The Stark law—which is widely criticized for its complexity—prohibits physicians from making referrals for services covered by government programs to entities in which they have financial interests unless they meet certain exceptions.
Danielle Sloane, a member at law firm Bass Berry & Sims in Nashville, called the proposed regulations positive overall.
“By in large, it makes significant changes and clarifications aimed at easing the technical burdens of the Stark law and reducing the number of self-disclosures coming to the CMS,” Sloane said. “It seems to be trying to update the Stark law for the new relationships that are out there.”
Sloane said the CMS likely realized after reviewing voluminous self-disclosures that “there's a lot going on out there that may violate the statute but doesn't really pose a significant risk of abuse.”
Among other changes, the proposed regulations feature two new exceptions to Stark, including allowing payments to physicians to employ non-physician practitioners. That exception is meant to ease shortages of primary-care physicians, among other things, according to a notice the CMS published in the Federal Register.
“It's a helpful recognition that we need additional practitioners to provide primary care services,” said Al Shay, a partner at law firm Morgan Lewis in Washington, D.C.
The second new exception would allow timeshare arrangements for the use of office space, equipment, personnel, supplies and other services that benefit rural or underserved areas.
Physicians and hospitals have long entered into such timeshare arrangements, raising questions about whether some of those might have been considered violations until now, Shay said. But the proposed regulations likely aim to just clarify the requirements, Shay said.
The proposed changes also give providers additional guidance and clarify terminology related to how they document financial relationships. Notably, they say that a single contract is not necessary and instead a collection of documents can suffice. The proposal says that the term of a lease or personal service arrangement doesn't have to be in writing if the arrangement lasts at least one year and is otherwise compliant.
The proposed regs also say that expired leasing and personal service agreements may continue, as long as they do so on the same terms.
“The change to alleviate the writing requirements … is clearly trying to reduce the flow of self-disclosures,” Sloane said.
Sloane cautioned, however, that agreements should still be documented even if the proposed regulations become reality.
Not all the proposed changes, however, will likely give all physicians and providers reasons to cheer—including one related to physician-owned hospitals.
Under the Affordable Care Act, the percentage of a hospital that may be owned by physicians is limited. The updated regulation would clarify that the percentage would include all doctors rather than just those who refer to the hospital.
Shay said if that change goes into effect, adjustments may be required at some physician-owned hospitals. That could include reducing some doctors' ownership interests, he said.
“I think that's going to get a lot of comments from that sector of the industry,” Shay said.
Industry group Physician Hospitals of America was not able to comment on the proposed regulations Friday.
The proposed regs also clarify that compensation paid to a physician organization may take into account referrals of any physician in the organization, not just those who stand in the shoes of the organization.
They would also clarify that a financial relationship does not necessarily exist when a doctor provides services to patients in a hospital if the hospital and physician bill independently for their services.
Judy Waltz, a a partner at law firm Foley & Lardner in San Francisco, said it will take time for attorneys and providers to fully understand the potential impact of all the proposed changes, but they do provide much-needed clarity in some areas.
In fact, the law's father and namesake, Fortney “Pete” Stark, said in 2013 that he would favor repealing the law as it currently exists and getting back to the law's initial intent.
“Stark is probably the most difficult of the federal healthcare laws to interpret,” Waltz said. “It's very easy to step over the line with Stark and the punishment is pretty draconian.”
No intent of wrongdoing is required to prove guilt, and offenses carry potential civil monetary penalties, Waltz said. In recent years, a number of Stark allegations have been brought to court under the False Claims Act, under which any damages are tripled.
Just this month, a federal appeals court upheld a $237 million judgement against Tuomey Healthcare System in Sumter, S.C., based on allegations that it violated the Stark law, leading to false claims. Though the appeals court ruled against the community hospital, the judge who wrote the opinion called the case “troubling” and said it's easy to see how even diligent attorneys might give clients incorrect advice given the Stark law's complexity.
“It seems as if, even for well-intentioned healthcare providers, the Stark law has become a booby trap rigged with strict liability and potentially ruinous exposure—especially when coupled with the False Claims Act,” Judge Albert Diaz wrote.