On November 1, 2018, the Centers for Medicare & Medicaid Services (“CMS”) filed the pre-publication version of the CY 2019 Physician Fee Schedule Final Rule (“2019 PFS Final Rule”). Within this massive publication, CMS finalized two regulatory changes affecting the exceptions at 42 CFR § 411.357 to the Physician Self-Referral Law (also known as the “Stark Law”) for compensation arrangements. The 2019 PFS Final Rule reconciles the regulations with the statutory changes made to the Stark Law enacted by the Bipartisan Budget Act of 2018 (“2018 BBA”) with respect to (1) how arrangements may fulfill the “writing” requirement under the compensation exception and (2) how arrangements that initially proceed without a signed agreement may still meet the signature requirement of an applicable exception. Parties to financial arrangements in effect on or after February 9, 2018 that implicate the Stark Law may rely upon these new modifications.
The Stark Law generally prohibits a physician from making a referral of designated health services (“DHS”) to an entity with which he or she (or an immediate family member) has a financial relationship. Section 411.357 details several excepted compensation arrangements carved out from the “financial relationship” definition for the purposes of the Stark Law. These exceptions include arrangements for the rental of office space and equipment, bona fide employment relationships, group practice arrangements with hospitals, certain fair-market-value compensation arrangements, among others.
Confirmation That a “Collection of Documents” Satisfies the “In Writing” Requirement
Several of the compensation arrangement exceptions to the Stark law require written, signed documentation of the financial arrangement’s terms and compensation, including those applicable to the rental of office space and equipment, personal services, physician recruitment, fair market value compensation, indirect compensation arrangements, and referral services. In recent years, CMS’s policy has been to credit various forms of written documentation as satisfying this written requirement, including contemporaneous documents evidencing parties’ course of conduct. This policy was explained in the 2016 PFS final rule preamble, but had yet to be codified in the regulations.
The 2018 BBA amended the Stark Law to clarify that the CMS does in fact have this discretion to determine what types of documents satisfy the written requirement. The 2019 PFS Final Rule writes this common understanding into the regulation at 42 C.F.R. § 411.354(e), specifying that the compensation arrangement exceptions’ written requirements may be satisfied by a “collection of documents, including contemporaneous documents evidencing the course of conduct between parties.”
Rules Relaxed For Meeting the Temporary Noncompliance with Signature Requirements.
When an entity seeks to take advantage of one of the exceptions to the Stark Law that requires written documentation, the parties have to also sign the documents. This is true not only of the compensation arrangement exceptions listed in § 411.357, but also for the general exceptions listed in § 411.355, and the ownership and investment interest exceptions listed in § 411.356. Currently, if an entity is temporarily noncompliant with the signature requirement, but remains compliant with all other criteria of the applicable exception, CMS allows an entity to obtain the necessary signatures within 90 days of the date of noncompliance without forfeiting the right to receive reimbursement for any DHS referred during that grace period. The parties to the arrangement effectively receive retroactive protection under the exception, regardless of whether any referrals are made or compensation is paid during the 90-day period. An entity could not take advantage of this more than once every three years with respect to the same referring physician.
The 2018 BBA reaffirms the 90-day window to correct noncompliance with any signature requirements and does not change the obligation of the parties to the arrangement to otherwise meet the remaining requirements of the exception. But the 2018 BBA loosened the signature requirement in three ways, and CMS amended its regulations at §411.353(g) accordingly as follows:
• the temporary signature noncompliance rule is no longer limited to the named Stark law exceptions in §§ 411.355, 411.356, and 411.357.
• the regulation no longer limits an entity from using the temporary noncompliance with the signature requirement rule to once every three years with respect to the same referring physician.
• the regulations no longer refers to the occurrence of referrals or the payment of compensation during the-90 day window.
Indefinite Holdovers Reaffirmed
In 2016, CMS revised § 411.357 to allow lease and personal service arrangements to be held over indefinitely, beyond the expiration date of any written document describing the arrangement. The 2018 BBA added nearly identical language to section 1877(e) of the Social Security Act. In the 2019 PFS final rule, CMS made no changes to the indefinite holdover provisions because the regulation already mirrors the modified statute.
Physicians and DHS entities with financial arrangements with potential noncompliance periods related to the writing, signature, and holdover requirements should review their arrangements to determine whether those problems still exist, given these regulatory updates.