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Joan Polacheck advises clients on a variety of health care compliance and regulatory issues, including fraud and abuse, Stark law, Anti-Kickback Law and Medicare reimbursement issues. She represents a broad range of health care industry clients, including hospitals, suppliers, and drug and device companies. Read Joan Polacheck's full bio.

On October 9, 2019, the US Department of Health and Human Services (HHS) published proposed changes to the physician self-referral law (Stark Law) (Stark Proposed Rule) and the Anti-Kickback Statute (AKS) and the Beneficiary Inducement Civil Monetary Penalty Law (CMPL) (AKS Proposed Rule).

The proposed rules represent some of the most significant potential changes to these laws in the last decade. HHS Deputy Secretary Eric Hargan said that they “would be a historic reform of how healthcare is regulated in America.” This On the Subject provides a high-level overview of key provisions in the proposed rules. More in-depth analysis will follow at our Regulatory Sprint Resource Page.

The “Sprint”

The Stark Law and AKS Proposed Rules have been promulgated as part of HHS’s “Regulatory Sprint to Coordinated Care,” which was launched in 2018 with the goal of reducing regulatory burden and incentivizing coordinated care. As part of this initiative, the Centers for Medicare and Medicaid Services (CMS) and the HHS Office of Inspector General (OIG) began scrutinizing a variety of long-standing regulatory requirements and prohibitions to determine whether they unnecessarily hinder the innovative arrangements that policymakers are otherwise hoping to see develop. The agencies took the step of formally seeking public input on this topic by issuing requests for information (RFIs) in June and August 2018. More information about HHS’s Sprint and the RFIs is available on our Regulatory Sprint Resource Page.

The Proposals

The Proposed Rules reflect a coordinated effort between CMS and OIG to address various challenges to the transition to value-based care. Both agencies clearly recognize that the two laws often operate in tandem, but they also emphasize that they are distinct and separate enforcement vehicles. Thus, in some instances OIG’s proposals may be more restrictive that CMS’s, and both agencies state that the AKS may act as a “backstop” to protect against arrangements that meet a Stark Law exception but are nonetheless considered abusive. CMS also proposes to remove compliance with the AKS as a requirement from several Stark Law exceptions, further underscoring the laws’ separateness.


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In U.S. ex rel. J. William Bookwalter, III, M.D. et al. v. UPMC et al., the US Court of Appeals for the Third Circuit endorsed two controversial interpretations of the Stark Law’s “volume or value” standard, known as the correlation theory and the practice “loss” theory. Specifically, the court held that the relators had made out a plausible allegation of an indirect compensation arrangement between surgeons and University of Pittsburgh Medical Center (UPMC)-affiliated hospitals. The court held that the relators were entitled to proceed to discovery because of the correlation between the amount of the productivity-based compensation paid to the surgeons and the volume of the surgeons’ referrals for inpatient hospital services (e.g., operating room and hospital room and board). Repeatedly invoking the concept of “where there is smoke, there might be fire,” the court also stated that the fact that at least three of the surgeons allegedly received compensation in excess of the hospital’s collections for their professional services supported the plausibility of the relators’ allegation that the compensation “takes into account” the volume or value of the physicians’ referrals to the hospitals.

If this holding sounds familiar, that is because it is based on the same logic advanced by the Fourth Circuit in U.S. ex rel. Drakeford v. Tuomey, the infamous Stark Law/False Claims Act (FCA) case that first put the hospital industry on notice that common productivity-based compensation to hospital-employed surgeons could implicate the Stark Law. While distinguishable from Tuomey, UPMC has important implications for hospitals and health systems that employ surgeons.

Summary of Allegations and Procedural History

In UPMC, the plaintiffs alleged that the UPMC hospitals where the neurosurgeons performed cases each had an indirect compensation arrangement with the surgeons and thus triggered the Stark Law’s prohibitions against referrals and the associated Medicare claims for reimbursement. Based on this alleged Stark Law violation, the plaintiffs claimed that the hospitals violated the FCA by submitting false claims for hospital services referred by the surgeons. The surgeons were paid a base salary and a productivity bonus of $45 per work RVU above a specified target. If a surgeon did not hit the target, her base compensation would be reduced the following year. The government had intervened in and settled another aspect of the case, but declined to intervene on these allegations.

The compensation arrangement between the surgeons and the UPMC hospitals was evaluated as a potential indirect compensation arrangement because the surgeons were employed by UPMC-affiliated medical practices, not directly by the UPMC hospitals. For Stark Law purposes, an indirect compensation arrangement requires, among other things, that the compensation paid to the physician “varies with” or “takes into account” the volume or value of the physician’s referrals to the hospital. In this case, the plaintiffs alleged that the compensation greatly exceeded fair market value and that at least three surgeons were paid more than the hospital collected for their services. The plaintiffs also asserted that “[e]very time . . . [the surgeons] performed a surgery or other procedure at the UPMC Hospitals, the Physicians made a referral for the associated hospital claims pursuant to the Stark Statute.”


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On August 24, 2018, the Office of Inspector General (OIG), Department of Health and Human Services (HHS) published a request for information, seeking input from the public on potential new safe harbors to the Anti-Kickback Statute and exceptions to the beneficiary inducement prohibition in the Civil Monetary Penalty (CMP) Law to remove impediments to care

On June 25, 2018, the Centers for Medicare and Medicaid Services (CMS) published a request for information, seeking input from the public on how to address any undue regulatory impact and burden of the physician self-referral law (Stark Law) on value-based and other coordinated care arrangements designed to improve quality and lower cost. While

On May 31, 2017, the US Department of Justice announced a Settlement Agreement under which eClinicalWorks, a vendor of electronic health record software, agreed to pay $155 million and enter into a five-year Corporate Integrity Agreement to resolve allegations that it caused its customers to submit false claims for Medicare and Medicaid meaningful use payments

In a case of first impression, a federal court found that the federal physician self-referral law’s (Stark Law) requirement that financial arrangements with physicians be memorialized in a signed writing could be material to the government’s payment decision. This case raises troubling questions about applying the False Claims Act (FCA) to what many in the industry consider “technical” Stark issues, especially given the Supreme Court’s description of the materiality test as “demanding” and not satisfied by “minor or insubstantial” regulatory noncompliance.

United States ex rel. Tullio Emanuele v. Medicor Associates (Emanuele), in the US District Court for the Western District of Pennsylvania, involves Medicor Associates, Inc., a private medical group practice (Medicor), and Hamot Medical Center’s (Hamot) exclusive provider of cardiology coverage. Tullio Emanuele, a qui tam relator and former physician member of Medicor, alleged that Hamot, Medicor, and four of Medicor’s shareholder-employee cardiologists (the Physicians) violated the FCA and Stark Law because Hamot’s multiple medical director compensation arrangements with Medicor failed to satisfy the signed writing requirement in the Stark Law’s personal services or fair market value exceptions during various periods of time. The US Department of Justice declined to intervene in the case, but filed a statement of interest in the summary judgment stage supporting the relator’s position.
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On December 7, 2016, the Office of Inspector General of the US Department of Health and Human Services published a final rule containing revisions to both the federal Anti-Kickback Statute safe harbors and the beneficiary inducement prohibition in the civil monetary penalty rules. Effective January 6, 2017, the Final Rule modifies certain existing safe harbors

On December 7, 2016, the Office of the Inspector General (OIG) of the US Department of Health and Human Services (HHS) issued a policy statement increasing its thresholds for gifts that are considered “nominal” for purposes of the patient inducement provisions of the civil monetary penalties law (section 1128A(a)(5) of the Social Security Act) (CMP

The Centers for Medicare & Medicaid Services (CMS) recently published a notice of proposed rulemaking to amend its regulations implementing and interpreting the Stark Law. CMS also used this proposed rule to state its positions on certain questions of Stark Law interpretation and application, and to solicit comments from the industry on whether the Stark

Over the last month the Office of Inspector General (OIG) of the Department of Health and Human Services and the Department of Justice (DOJ) have each taken actions that suggest an increasing appetite to examine the financial relationships between physicians and recipients of those physicians’ referrals under the federal Anti-Kickback Statute (AKS). By announcing new OIG and DOJ enforcement actions and the new OIG fraud alert, the agencies are signaling to the health care industry that physician financial relationships are one of their priority areas. These announcements should prompt organizations to review their physician arrangements and contracting policies to help ensure compliance with the AKS as well as the Physician Self-Referral (“Stark”) Law.
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