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Stark Law Proposed Change Affects Group Practice Special Rules for Productivity Bonuses, Profit Shares

On October 9, 2019, the US Department of Health and Human Services Centers for Medicare and Medicaid Services (CMS) published proposed changes to the physician self-referral law (Stark Law). Physician practices are subject to the Stark Law, and the proposed rule includes an important clarification affecting certain group practices’ compensation models. CMS proposes to revise its regulations to clarify the special rule for group practice distributions of income from Stark designated health services (DHS). Compliance with this special rule is a requirement of the Stark Law’s definition of a “group practice,” and compliance with the “group practice” definition is generally necessary for physician groups to have the protection of the in-office ancillary services (IOAS) exception to the Stark Law. The special rule for sharing DHS profits permits a group, or a pod of five or more physicians in the group, to pool their DHS income and distribute the pool in a manner...

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HHS Proposes Substantial Changes to the Stark Law and the Anti-Kickback Statute Regulations

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...

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HHS Will Soon Seek Public Comment on Anti-Kickback Statute Reform

During a July 17, 2018, hearing before the House Ways and Means Subcommittee on Health, United States Department of Health and Human Services (HHS) Deputy Secretary Eric Hargan testified about HHS’ efforts to review and address obstacles that longstanding fraud and abuse laws pose to shifting the Medicare payment system to a value-based, coordinated care payment system. Deputy Secretary Hargan confirmed that the agency is looking at regulatory reforms to both the physician self-referral law (Stark Law) and the Anti-Kickback Statute (AKS) as part of HHS’ “Regulatory Sprint to Coordinate Care.” According to Hargan’s testimony, “the goal of the sprint is to remove regulatory barriers to coordinated care while ensuring patient safety. We want to genuinely engage stakeholders in this effort, and solicit feedback at each stage—but this is a sprint, not a jog. These words were chosen specifically because we want to fix, as quickly as possible, the regulatory...

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CMS Seeks Comments on Stark Law Reforms Needed to Reduce Obstacles to Innovation

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 the overall focus of CMS’s request for information is on the Stark Law’s actual or perceived barriers to innovation, the request also gives the health care industry a unique opportunity to comment on and request revisions or clarifications for any significant Stark Law provision, including the provisions regarding fair market value, volume or value, and commercial reasonableness, as well as the Stark “group practice” definition. As part of its focus to shift from a fee-for-service to a value-based health care delivery system, the US Department of Health and Human Services (HHS) launched a “Regulatory Sprint to...

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DOJ Settlement with Home Health Providers Underscores Strategic Considerations for Self-Disclosure

Eventually, any health care organization with an effective compliance program is very likely to discover an issue that raises potential liability and requires disclosure to a government entity. While we largely discuss False Claims Act (FCA) litigation and defense issues on this blog, a complementary issue is how to address matters that raise potential liability risks for an organization proactively. On August 11, 2017, a group of affiliated home health providers in Tennessee (referred to collectively as “Home Health Providers”) entered into an FCA settlement agreement with the US Department of Justice (DOJ) and the US Department of Health and Human Services Office of Inspector General (OIG) for $1.8 million to resolve self-disclosed, potential violations of the Stark Law, the Federal Anti-Kickback Statute, and a failure to meet certain Medicare coverage and payment requirements for home health services. This settlement agreement underscores the strategic...

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Physician Compensation Scrutiny Continues in Recent FCA Settlement

A hospital system in Missouri recently agreed to settle with the US Department of Justice (DOJ) for $34 million to resolve claims related to alleged violations of the Stark Law. On May 18, 2017, DOJ announced a settlement agreement with Mercy Hospital Springfield (Hospital) and its affiliate, Mercy Clinic Springfield Communities (Clinic). The Hospital and Clinic are both located in Springfield, Missouri. The relator’s complaint was filed in the Western District of Missouri’s Southern Division on June 30, 2015. The complaint’s allegations center on compensation arrangements with physicians who provided services in an infusion center. According to the complaint, until 2009 the infusion center was operated as part of the Clinic, and the physicians who practiced at the infusion center shared in its profits under a collection compensation model. In 2009, ownership of the infusion center was transferred to Mercy Hospital so that it could participate in the 340B...

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A Hospital’s Deserving Stark and AKS Victory—But At What Cost?

This April, providers cheered when a federal district court in the Middle District of Florida found insufficient evidence to support a relator’s theory that a hospital had provided free parking to physicians, in violation of the Stark Law and Anti-Kickback Statute (AKS). In the Report and Recommendation for United States ex rel. Bingham v. BayCare Health Systems, 2017 WL 126597, M.D. Fla., No. 8:14-cv-73, Judge Steven D. Merryday of the Middle District of Florida endorsed magistrate judge Julie Sneed’s recommendation that Plaintiff Thomas Bingham’s Motion for Partial Summary Judgment be denied and that Defendant BayCare Health System’s Motion for Summary Judgment be granted. However, as we discussed in a previous FCA blog post regarding these allegations, this type of case encapsulates a worrying and costly trend where courts allow thinly pleaded relator claims in which the government opted not to intervene, to survive past the motion to dismiss stage into...

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Is the Stark Law’s “Signed Writing” Requirement Material to Payment: One Federal Court Says Yes

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...

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CMS Reissues Stark Rules Restricting Certain Unit-based Rental Rate Arrangements and Issues Two Stark Updates

On November 15, 2016, as part of its 2017 Medicare Physician Fee Schedule update, the Center for Medicare and Medicaid Services reissued its prohibition on certain unit-based rental arrangements with referring physicians, adopted updates to the list of CPT/HCPCS codes defining certain of the Stark Law’s designated health services and implemented a minor technical change to its instructions for submitting a request for an Stark advisory opinion. These revisions can be found at 81 Fed. Reg. 80170, 80524-36. Read the full article.

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Old Dog, New Tricks: Fraud and Abuse in the Age of Payment Reform

The good, reassuring news about that “old dog” fraud and abuse as it enters an age of payment reform is that criminal liability for fraud still requires a specific intent to defraud the federal health care programs, anti-kickback liability still requires actual knowledge of at least the wrongfulness, if not the illegality, of the financial transaction with a referral source, and civil False Claims Act liability for Stark Law violations still requires actual knowledge, a reckless disregard for, or deliberate ignorance of the Stark Law violation. This should mean that good faith and diligent efforts to comply with law, including seeking and following legal counsel, still go a long way in managing an organization’s and individual executive’s risk under the fraud and abuse laws. The bad, unsettling news about fraud and abuse in an age of payment reform, however, is that (1) anxiety about reform and stagnating and declining physician incomes are propelling a spike...

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