On July 8, CMS proposed significant changes to the Stark Law via a far-reaching proposed rule and commentary that would—and in a few cases may already—eliminate numerous technical traps under the current regulatory scheme.

From eliminating time limitations in connection with ‘holdovers’ of existing arrangements, to affording greater flexibility in signature timing, to clarifying that a lack of a stated term length is not necessarily fatal in the context of exceptions requiring a minimum term of at least one year, CMS proposes a host of liberalizations that would have profound implications for Stark Law compliance.

Throughout the commentary accompanying the proposed rule, CMS frequently references the experience it has gained through its administration of the Self-Referral Disclosure Protocol. On a host of technical fronts along which it had long held a consistent (if wooden) line, CMS is now effectively conceding that the energy required of providers—and perhaps CMS in processing self-disclosures—to maintain strict technical compliance is not justified in light of the often-tenuous link between a lack of strict technical compliance and genuine program abuse.

Although the implications for self-disclosures that were already submitted to CMS are unclear, CMS’s clear shift in tone is cause for optimism that CMS may more expeditiously and liberally process disclosures of purely technical violations among its current backlog.

Highlights of the proposed rule include:

  • New exceptions: In a recognition of changing healthcare delivery models, the proposed rule would add an exception, in many ways paralleling the physician recruitment exception, for assisting physician practices’ recruitment of non-physician practitioners such as physician assistants and nurse practitioners. Another new exception would separately address timeshare arrangements, affording a clear and more flexible pathway to structure such arrangements.
  • Less formal approach to agreements: CMS validates the view that one can cobble together various documents in lieu of a formal contract to satisfy the writing requirement of various exceptions; however, the precise interplay of this requirement with the signature requirement remains unclear. That is, even if multiple documents in any form create an agreement, would each party need to sign at least one of the documents to satisfy a Stark Law exception?
  • Elimination of time limits for holdovers: CMS proposes to eliminate the 6 month maximum holdover provision in certain exceptions to permit holdovers for longer periods of time provided that the holdover continues on the same terms and conditions as the original arrangement.
  • Facility / professional services: CMS also assuages any lingering industry fears with respect to the outlier Kosenske case (a Third Circuit case that held that a physician’s use of a hospital’s resources – for example, examination rooms – when treating hospital patients is “remuneration,” even when the hospital bills for the resources and services separately from the physician billing for professional fees). CMS clarifies that, in the absence of global billing, remuneration generally is not conferred by a hospital to a physician when both facility and professional services are provided to patients in a hospital-based department.
  • Already effective “clarifications”? Critically, CMS’s commentary includes clarifications to the industry’s generally held interpretations of the current verbiage of existing exceptions, like the personal-services and lease exceptions. The clarifications may carry immediate implications for some self-disclosures being considered by providers—and perhaps for some submitted self-disclosures as well—even in the absence of a final rule. For example, with respect to the less formal approach to agreements, CMS stated that it was “simply clarifying that the rules do not require a particular kind of writing, for example, a formal contract” and “clarify[ing] that a written contract with a formalized ‘term’ provision is not necessary to satisfy the regulations.” In other words, providers can arguably already treat these types of agreements as fully effective for Stark Law purposes.
  • Value-based healthcare models: Finally, CMS also lays out an extensive, thoughtful solicitation of comments regarding whether value-based healthcare models are constrained by the Stark Law, potentially signaling that even further liberalizations may be on the horizon.

The Stark Law discussion appears on pages 606-679 of this PDF version of the Calendar Year 2016 Physician Fee Schedule proposed rule. Comments are due on September 8.

Typically, CMS issues the final rule updating the Physician Fee Schedule in the fall to be effective on January 1, and so any revisions to the Stark Law regulations may take effect as early as next year.