August 30, 2018

QUESTION:        What is the latest formal regulatory guidance from the government on how hospitals are to structure a gainsharing program or a compensation arrangement with physicians who assist a hospital with the hospital’s Value Based Purchasing Program (“VBP”)?

ANSWER:            Currently, there is none – this is why the responses to the June 25, 2018 CMS Request for Information on the Stark Law and the OIG’s August 27, 2018 Request for Information that is described in this week’s “Government at Work” are so important.

Both OIG and CMS have referenced the HHS “Regulatory Sprint to Coordinated Care.”  Both OIG and CMS have recognized that the Fraud and Abuse Laws that are within their jurisdiction (the Stark Law in CMS’s case and the Anti-Kickback Statute and Civil Money Penalty Law (the “CMP”) in OIG’s case) can create real or perceived barriers to achieving clinical and financial integration between hospitals and physicians.  What is unfortunate is that in the past neither CMS nor OIG has shown much of a willingness to address those barriers to hospital-physician integration efforts.

As we pointed out to CMS (and also intend to inform OIG), if removing unnecessary governmental obstacles to care coordination is a key priority for HHS, then the planned HHS “Regulatory Sprint to Coordinated Care” will not get off the starting line without significant revisions to the regulations implementing the Stark Law, the Anti-Kickback Statute and the CMP, which are well within the respective discretion of CMS and OIG to implement.

For example, hospitals need immediate guidance concerning the ability of a hospital to compensate physicians who assist the hospital under Medicare’s VBP.  It is difficult, if not impossible, for a hospital to achieve the desired goals under the VBP without physician input and cooperation.  However, the fair market value of that input and cooperation is difficult to determine and hourly payment rates are often not reflective of the fair market value of the services actually being provided to the hospital by the physicians.

Hospitals need to be assured that utilizing a payment methodology that is based, in whole or in part, on the amount of the payment that the hospital receives under the VBP due to the services provided by the physicians will satisfy an exception to the Physician Self-Referral Law and will not violate the Anti-Kickback Statute or the CMP.

In addition, since 2001, the OIG has provided Compliance Program and Advisory Opinion Guidance on gainsharing arrangements.  (See, OIG Supplemental Compliance Program Guidance for Hospitals, 70 Fed. Reg. 4858, 4869-70 (Jan. 31, 2005); e.g., OIG Advisory Opinions 01-01 (Jan. 11, 2001); 05-01 (Feb. 4, 2005); 05-02, 05-03, 05-04 (Feb. 17, 2005); 05-05, 05-06 (Feb. 25, 2005); 06-22 (Nov. 16, 2006); 07-21, 07-22 (Jan. 14, 2008); 17-09 (Jan. 5, 2018).  However, no safe harbor exists for gainsharing arrangements.

CMS issued a proposed regulation, Incentive Payment and Shared Savings Programs, on July 7, 2008 (to be codified at 42 C.F.R. § 411.357(x)).  However, that proposed regulation did not adequately address VBP and  differed significantly from OIG’s gainsharing guidance.  Rather than publish a final regulation, CMS asked for public comment on 55 aspects of the proposed regulation.  73 Fed. Reg. 69,725, 69,795-98 (Nov. 19, 2008).  Unfortunately, to date, CMS has failed to issue any type of formal (or informal) guidance on the application of the Stark Law to gainsharing or other shared savings programs.

The OIG should turn its gainsharing, compliance and advisory opinion guidance into a safe harbor.  While we would prefer a new Stark gainsharing exception, a new Stark exception may not necessary so long as CMS states unambiguously that a hospital that complies with that OIG gainsharing safe harbor will satisfy the personal services exception to the Physician Self-Referral Law.

CMS and OIG should also propose additional, consistent guidance that will address VBP and other shared savings programs.  Such a position would be consistent with the position taken by CMS and the OIG in adopting parallel Stark exceptions and anti-kickback safe harbors for providing financial assistance to physicians implementing electronic prescribing and electronic health records (See 42 C.F.R. § 411.357(v)-(w); 42 C.F.R. § 1001.952(x)-(y)) and would provide practical guidance that hospitals and physicians could use to achieve clinical and financial integration.

May 17, 2018

QUESTION:        We are analyzing the fair market value of what we pay our employed physicians.  How should we classify physicians who practice in more than one specialty?

ANSWER:            There is no definitive rule as to how a physician’s specialty should be classified for compensation or compensation analysis purposes.  For example, the MGMA Physician Compensation Survey directs survey respondents to list their specialty as the area where they spend 50% or more time.  Others may classify physicians into specific specialties based on their training or the specialty that the physicians hold themselves out in.

The Board certification of each physician is another criterion that can be used. In the end, specialty classification for compensation analysis purposes depends on the criteria used by those conducting the analysis.  The key is consistency.

As the Office of Inspector General stated in its Supplemental Compliance Guidance for Hospitals, that when analyzing physician compensation for compliance with the Stark law,

“hospitals should have appropriate processes for making and documenting reasonable, consistent, and objective determinations of fair market value.”
70 Fed. Reg. 4863 (Jan. 31, 2005). (Emphasis added.)

September 14, 2017

QUESTION:        We just discovered that several leases between the hospital and physicians who are active members of our medical staff expired several years ago without being renewed in writing.  We understand that the Stark Law requires a written lease.  Do we have any alternative other than a self-disclosure?

ANSWER:           Yes.  On November 16, 2015, CMS provided some much needed relief from technical violations of the Stark Law such as the one that you have described.

The first thing that you must determine is that a lack of a writing is the only problem that you have.  Therefore, you need to document that each lease complied with the other requirements of the Stark rental of office space exception, especially that at all times the rent that was paid by each physician constituted fair market value, commercially reasonable rent that did not take into account or vary based on any referrals or other business generated by the physicians.

If so, then you should be aware that in the November 16, 2015 Federal Register, CMS stated that it has received numerous submissions similar to your question that related to potential violations caused by the writing requirement, including the “…failure to renew an arrangement that expired on its own terms after at least 1 year.”  80 FR 71314.

CMS then clarified the writing requirement, provided policy guidance, and also provided illustrative examples of the writing requirement, including “checks issued for items, services or rent” (80 FR 71316).  (Emphasis added.)  In all likelihood, each month each physician paid the physician’s rent with a check that was in writing and signed by each physician, and each month the hospital endorsed and deposited those checks.  If the rent was deposited electronically, then the Uniform Electronic Transaction Act will give an electronic transfer of funds the same force and effect as a written check.

Those rent checks/electronic transfers of rent will be found to constitute “contemporaneous documents (that is, documents that are contemporaneous with the arrangement) [that] would permit a reasonable person to verify compliance with the applicable exception at the time that a referral is made” (80 FR 71315) and, as such, satisfied the writing requirement set forth in 42 C.F.R. §411.357(a).

Since this is a policy clarification and not a new regulation, the fact that the leases expired prior to the date of the CMS guidance does not prohibit you from applying this guidance to your situation, even if those expired leases predate that guidance.

If the leases expired after January 1, 2016, then you can take advantage of a change to the Stark Rental of Office Space exception that went into effect on January 1, 2016, which provides that the lease will continue to comply with the Stark exception so long as the lease continues to satisfy the other requirements of the exception.  (See 42 C.F.R. §411.357(a)(7).

September 22, 2016

QUESTION:        We have just determined that several of our compensation arrangements have failed to comply with a Stark Law exception and that we need to make a Self-Disclosure to CMS.  Is there anything new with this process?

ANSWER:            Yes.  Please see the “Government at Work” section of this week’s HLE for a link to CMS’s proposed Stark Voluntary Self-Referral Disclosure Protocol (the “Proposed SRDP”).  While it is only proposed and has not been adopted in final form, since CMS’s Proposed SRDP is based on CMS’s February 12, 2016 overpayment rule, we recommend you follow the Proposed SRDP.

The Proposed SRDP is much more structured than the former protocol and requires a provider to utilize CMS’s mandated forms and format.  One helpful feature of the Proposed SRDP is that it provides several illustrative examples as to how CMS expects a provider to determine the amount of the overpayment.

The Proposed SRDP also makes it clear that if conduct raises concerns under the Anti-Kickback statute and the Stark Law, then you are to use the OIG Self-Disclosure Protocol, not the Proposed SRDP.  The Proposed SRDP then states “Disclosing parties should not disclose the same conduct under both the SRDP and OIG’s Self-Disclosure Protocol.”

The Proposed SRDP also states that you must look back six years.  Again, this is now required by CMS’s Overpayment Rule.  CMS wants the six-year look-back summary to be by calendar year.  If no overpayments were made in one or more calendar years during that six-year look-back period, the year must be included, but the amount of the overpayment for that year is to be left blank.  A provider must also identify the overpayment by physician using the physician’s NPI Number.

CMS provided this chart as an example of the format they expect a provider to provide.








CY 2010

 CY 2011

 CY 2012

 CY 2013

 CY 2014

 CY 2015

 CY 2016

Dr. A xxxxxxxxxx 2/18/16 $100,000.00 $100,000.00 $100,000.00 $300,000.00
Dr. B xxxxxxxxxx 3/24/16 $25,000.00 $10,000.00 $75,000.00 $  50,000.00 $  50,000.00 $  50,000.00 $10,000.00 $270,000.00
Dr. C xxxxxxxxxx 4/5/16 $  5,000.00 $25,000.00 $  20,000.00 $  20,000.00 $  20,000.00 $  90,000.00
                                                                                                                                                                                                                 TOTAL:       $660,000.00

Want more information on the Proposed SRDP, the February 12, 2016 Overpayment Rule, recent False Claims Settlements, and new cutting edge issues like how to implement MACRA and CJR Gainsharing?  Then join Henry and Dan in Las Vegas on October 13-15 for HortySpringer’s Physician-Hospital Contracts Clinic.

September 24, 2015

QUESTION:        One of the few remaining independent physician groups whose physicians are members of our medical staff desperately needs help. They have been unable to find a physician who is willing to relocate, but have found several qualified non-physician practitioners who are. The group has approached the hospital requesting the same type of net income guarantee recruitment assistance agreement that the hospital would offer to the group if they had located a physician. Since it will be less costly to provide the recruitment assistance needed to recruit a non-physician practitioner, this seems like a simple decision. However, our attorney is telling us that the proposed arrangement violates the Stark law. How?

ANSWER:          Unfortunately, your legal counsel is correct. The Stark law only applies to physicians. A PA, CRNP, CRNA, or other non-physician practitioner (“NP”) is not a “physician” as defined by the Stark law. So the Stark law would not apply to a direct compensation arrangement between the NP and the hospital.

However, that is of little practical benefit if the request is for an income guarantee. By definition, the hospital must, directly or indirectly, pay the guarantee payment to the physician group. This creates a compensation arrangement between the hospital and the group and so in order to comply with the Stark law, this arrangement must satisfy an exception. Unfortunately, in the Preamble to the Stark Phase 3 Rules, in response to a comment asking whether recruitment assistance could be provided to a group to recruit an NP, CMS responded by stating that the physician recruitment exception is limited to the recruitment of a physician. CMS then stated that any recruitment payments made by a hospital to a physician group to assist the group to recruit an NP would constitute a compensation arrangement “to which no exception would apply.”

We have never understood CMS’s position and now it appears that CMS has seen the error of its ways. In the July 15, 2015 Federal Register, CMS proposed creating a new exception to the Stark law that would specifically permit a hospital to provide recruitment assistance to a physician group to employ an NP.

While a positive step, there are a number of concerns with the proposed exception. As proposed, the new exception is much more limited than the physician recruitment exception. For example, it limits the exception to PAs, CRNPs and certified nurse midwives who are employed by a physician group to provide primary care services. It also limits the type of recruitment assistance that may be provided.

In comments that we submitted to CMS, we requested that CMS revise this exception to make it less restrictive and more in line with the physician recruitment exception. Whether CMS will agree with our comments remains to be seen when it publishes final regulations.

Therefore, the safest course of action right now is to provide the recruitment assistance directly to the NP. However, current law does not permit a guarantee-type arrangement with a physician group to recruit an NP. As a result, we have found the types of recruitment assistance that are currently permitted to be used with an NP to be very limited. If you have the luxury of time, a better approach would be to wait and see if CMS publishes the proposed NP recruitment exception in final form and then follow that exception.

The $115,000,000 settlement described in the “Your Government at Work” section of this week’s HLE was, for the most part, due to the compensation paid to employed physicians. Want to learn more about the types of compensation that can be paid to employed physicians? Join Henry, Rachel and Charlie in Las Vegas on October 15-17 at the Physician Employment Institute.