Court Upholds CMS’ Prohibition on ‘Under-Arrangements’ Transactions, Strikes Down CMS’ Prohibition on ‘Per-Click’ Equipment Rental Arrangements

By on July 6, 2015

A 2008 rule change from the Centers for Medicare and Medicaid (CMS)—which effectively prohibited referring physician-owned companies from furnishing hospital services “under arrangements”—has withstood a challenge by a urology trade association. On June 12, 2015, the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) held in Council for Urological Interests v. Burwell that the 2008 rule change, which redefined an “entity furnishing designated health services” to include entities that perform the services, not just bill for them, constituted a reasonable construction of the Stark Law and was entitled to deference. The appellate court, however, held that CMS’ prohibition on “per-click” equipment rental arrangements lacked a rational basis in light of the agency’s “tortured reading” of a relevant conference report, which, the court noted, was “the stuff of caprice.” Accordingly, the court struck down CMS’ 2008 prohibition on per-click equipment rental arrangements involving referring physician-owned equipment leasing companies.

Read the full On the Subject discussing the announcement.

Daniel H. MelvinDaniel H. Melvin
Daniel H. Melvin counsels clients on Stark, Anti-Kickback and Medicare compliance issues such as physician compensation matters, and assists clients in investigating and addressing potential or alleged violations, including self-disclosures and defense of Stark- and Anti-Kickback-related qui tam actions. He also works with hospitals and physicians on coordinated care and other alternative service delivery models, including bundled payment and cost savings models, providing regulatory and transactional counsel and support. Read Daniel H. Melvin's full bio.

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