November 21, 2019

QUESTION:        We need to employ physicians in order to provide the care needed by our patients.  The main reasons that private practice is no longer a viable option for many physicians are the ever increasing costs of operating a practice (especially malpractice insurance and EHR costs) while professional reimbursement keeps decreasing.  However for the same reasons, we rarely break even on a physician practice.  Does anyone in the government understand this or do they assume that we overpay physicians to get their referrals?

ANSWER:          Unfortunately, many courts do not understand your dilemma.  Some courts seem to take the position that a hospital paying a physician more than the physician generates in professional fees is evidence of unreasonable compensation that violates the Stark Law.

However, help is on the way.  In the October 19, 2019, proposed Stark Regulations, CMS has provided an excellent description of the analysis that should be followed when assessing whether the compensation paid to a physician violates the Stark Law.

For the first time, CMS has included a definition of the term “commercially reasonable” that specifically states that an arrangement may be commercially reasonable even if “it does not result in a profit for one or more of the parties.”  CMS has also substantially revised the definition of “fair market value” and has made it clear that in order to violate the “volume or value” standard there must be a direct correlation between the physician referrals and the amount to be paid to the physician.

CMS also stated that salary surveys are to be treated as benchmarks, not the last word on physician compensation and even provided easy to understand examples such as the following in order to make this point crystal clear:

By way of example, assume a hospital is engaged in negotiations to employ an orthopedic surgeon.  Independent salary surveys indicate that compensation of $450,000 per year would be appropriate for an orthopedic surgeon in the geographic location of the hospital.  However, the orthopedic surgeon with whom the hospital is negotiating is one of the top orthopedic surgeons in the entire country and is highly sought after by professional athletes with knee injuries due to his specialized techniques and success rate.  Thus, although the employee compensation of a hypothetical orthopedic surgeon may be $450,000 per year, this particular physician commands a significantly higher salary and the general market value (or market value) of the transaction may, therefore, be well above $450,000.  The statute requires that the compensation is the value in an arm’s length transaction, but that value must also be consistent with the general market value (or market value) of the subject transaction.  In this example, compensation substantially above $450,000 per year may be fair market value.

The proposed rules also provide much needed guidance on value-based arrangements.

The comment period will end on December 31, 2019.  We hope that CMS will finalize these proposed regulations as soon as possible after that date and that the federal courts begin to adopt CMS’s analysis.

October 31, 2019

QUESTION:        I thought I saw something recently about the Stark and Safe Harbor Regulations being changed?  Did I hallucinate after eating too much Halloween candy?

ANSWER:          Well, you may have been hallucinating, but it wasn’t about the Stark and Safe Harbor Regulations.  On October 9, 2019, CMS issued a proposed rule to modernize and clarify the Stark regulations and, at the same time, the OIG published proposed amendments to the Anti-Kickback Safe Harbor regulations.  Comments will be accepted through December 31, 2019.

The proposed amendments to the Stark regulations would:

  • create new, permanent exceptions to the Stark Law for value-based arrangements;
  • solicit comments about the role of price transparency in the context of the Stark Law and whether to require cost-of-care information at the point of a referral for an item or service;
  • provide additional guidance on several key requirements that must often be met in order for physicians and healthcare providers to comply with the Stark Law, including how to determine if compensation is at fair market value;
  • provide guidance on a wide range of other technical compliance issues; and
  • propose a new Stark exception for donations of certain cybersecurity technology.

The revisions proposed by the OIG to the Anti-Kickback safe harbors apply to certain coordinated care and associated value-based arrangements between or among clinicians, providers, suppliers, and others and add protections under the anti-kickback statute and civil monetary penalty (“CMP”) law that prohibit inducements offered to patients for certain patient engagement and support arrangements to improve quality of care, health outcomes, and efficiency of care.

The proposed rule would add a new safe harbor for donations of cybersecurity technology and amend the existing safe harbors for electronic health records (“EHR”) arrangements, warranties, local transportation, and personal services and management contracts.  The proposed rule would also add a new safe harbor related to beneficiary incentives under the Medicare Shared Savings Program and a new CMP exception for certain telehealth technologies offered to patients receiving in-home dialysis.

Do you want to know more?  HortySpringer partners Henry Casale and Dan Mulholland went over these proposals in detail earlier this month in a Special Audio Conference and told everyone what they should be doing right now to get ready for them.  You can order a recording of that audio conference here.

February 25, 2016

QUESTION:        The new, final, Stark regulations permit a hospital to provide financial assistance to a physician or physician group to employ or contract with non-physician practitioners (physician assistants, nurse practitioners, clinical nurse specialists, certified nurse midwives, clinical social workers, and clinical psychologists) (“NPP”). Is the amount of the assistance capped? How long can a hospital provide such financial assistance?

ANSWER:            The financial assistance may not exceed 50 percent of the actual compensation, signing bonus, and benefits paid by the physician or physician group to the NPP. Compensation must be at fair market value and may not take into account referrals or business generated between the parties. As far as duration of the assistance, hospitals may provide financial assistance only for the first two consecutive years of the compensation arrangement between the NPP and the physician.

January 21, 2016

QUESTION:        We have an e-mail exchange with a referring physician that clearly describes the services that the physician is to perform and the amount that the hospital is to pay the physician for those services. However, we cannot locate a written agreement. Do we have a Stark problem?

ANSWER:           No, thanks to the new Stark Regulations that went into effect on January 1, 2016. These regulations were promulgated as part of Medicare’s 2016 Physicians’ Fee Schedule. In these regulations, CMS stated that, based in large part on what CMS has learned from voluntary self-disclosures, CMS wanted to clarify the terms that are required in order to satisfy the Stark writing requirement that is included in many of the compensation arrangement exceptions.

CMS first stated that “in most instances, a single written document memorializing the key facts of an arrangement provides the surest and most straightforward means of establishing compliance with the applicable exception.” However, CMS then made it clear that this is not the only means of complying with the Stark writing requirement, stating: “CMS’ existing policy is that a collection of documents, including contemporaneous documents evidencing the course of conduct between the parties, may satisfy the writing requirement of the exceptions for compensation arrangements that require a writing.”

CMS then listed a number of examples that will comply with the writing requirement that included, but are not limited to: board minutes or other documents authorizing payment for specified services; written communications between the parties “including hard copy and electronic communication”; time sheets; fee schedules for specified services; check requests or invoices identifying items or services provided and the rate of compensation; or accounts payable or receivable records documenting the date and rate of payment and the reason for the payment.

Therefore, your e-mail exchange will satisfy the Stark writing requirement and the electronic signatures in the e-mail will satisfy that the arrangement must be signed by both parties (see the Federal Electronic Records and Signatures in Commerce Act).

The new rules are not intended to undo hospital compliance efforts and an effective compliance process remains an essential component of any health care organization. However, the new Stark rules will allow the parties to place substance over form when determining compliance with an applicable Stark exception.

December 3, 2015

QUESTION:         The new, final, Stark regulations permit a hospital to provide financial assistance to a physician or physician group to employ or contract with certain non-physician practitioners. What types of non-physician practitioners are covered under the new regulations?

ANSWER:            Hospitals may provide financial assistance to help physicians or a physician group hire or contract with physician assistants, nurse practitioners, clinical nurse specialists, certified nurse-midwives, clinical social workers, or clinical psychologists. Financial assistance for other types of non-physician practitioners, such as nurse anesthetists, physical therapists, and dietitians, is not covered by the new exception.