QUESTION: I hear that the new Stark regulations have a way that Stark violations can be corrected without penalty. Is that so?
ANSWER: Yes, within limits. CMS has now given hospitals and doctors a new way to correct noncompliance with the Stark law without having to make a self-disclosure. The regulations, which became effective on January 19, 2021, contain a new regulation at 42 CFR §411.357(h) that allows parties to a compensation arrangement to reconcile all discrepancies while a contract is in effect or up to 90 days after it terminates so long as after the reconciliation the arrangement fully complies with all elements of the applicable exception.
For example: say a hospital contract with a medical director calls for payment at $140 per hour but the doctor is paid $150 per hour. If $150 still is within FMV range, all that is necessary is to reflect that in amendment going forward. If the amount actually paid exceeds fair market value, the contract can be amended to recoup payments in excess of FMV via an offset against amounts due in the future (e.g., a payroll deduction) while the relationship is in effect, but the entire amount of the excess must be recouped within 90 days after the contract ends.
CMS also said that not every error will cause a financial relationship to be out of compliance with Stark nor must every mistake or error be corrected in order to maintain compliance. Administrative and operational errors that are identified and rectified in a timely manner will not cause a relationship to be out of compliance. In addition, CMS said that not all transfers of remuneration create compensation arrangements. Examples include mistaken payments that are never identified, theft, use of office space not in lease, use of equipment beyond the expiration of the lease term or slight deviation from written agreement such as a one-time incorrect rental payment.
This new option is a great alternative to resorting to the Stark self-disclosure protocol. To learn more about it, stay tuned for an upcoming Health Law Expressions podcast, where Horty Springer attorneys Josh Hodges and Dan Mulholland will discuss this new rule, or e-mail them at firstname.lastname@example.org or email@example.com.