CMS Proposes Added Revisions to Stark Law Definition

Table of Contents Track recordProposed Revisions to Definition of ‘Indirect Compensation Arrangement’Proposed Definition of ‘Unit’Proposed…

On July 13, 2021, the Centers for Medicare and Medicaid Solutions (“CMS”) unveiled a Proposed Rule that proposes to amend specified polices implementing the Medical doctor Self-Referral Law, usually known as the “Stark Law”. The Proposed Rule proposes to revise once again the definition of “indirect payment arrangement” (ICA), successfully to revert the indicating of the definition again – for the vast bulk of indirect monetary associations concerning DHS entities and referring medical professionals – to the definition of that expression as it was in spot prior to the latest Stark Law rulemaking, “Modernizing and Clarifying the Physician Self-Referral Laws” (the “MCR Ultimate Rule”), published on December 2, 2020.[1]  The Proposed Rule also proposes to outline the expression “unit” and the phrase “services that are individually performed”, both for functions of the ICA definition.

Track record

Prior to the MCR Closing Rule, an unbroken chain of economic interactions among a referring health practitioner (or immediate family member) and the entity furnishing selected health companies (DHS) effectuated an ICA only if, between other factors, the referring physician gained mixture compensation that diverse with, or took into account, the quantity or worth of referrals or other business generated by the referring medical professional for the entity furnishing the DHS.  To the extent that an ICA was effectuated, a Stark Regulation exception wanted to be glad in get for referrals and similar claims to be permitted.

In the MCR Last Rule, CMS extra a definitional prerequisite to the definition of ICA, these kinds of that – in addition to combination payment needing to differ with referral quantity – the “individual device of compensation” received by the doctor must either (i) not be truthful industry price for objects or providers actually supplied or (ii) include the physician’s referrals to (or company generated for) the entity furnishing DHS as a variable, ensuing in an improve or lessen in the physician’s payment that positively correlates with the number or price of the physician’s referrals to (or organization created for) the entity.

By including this definitional requirement, the MCR Closing Rule additional narrowed an by now slim regulatory definition of ICA, such that couple of unbroken chains of monetary associations can truly effectuate an ICA.  To the extent an ICA exists, it should fulfill the exception for ICAs (42 CFR 411.357(p)).

Proposed Revisions to Definition of ‘Indirect Compensation Arrangement’

In the Proposed Rule, CMS stated that the MCR Final Rule ‘inadvertently omitted’ from the revised definition of ICA a clause of regulatory textual content that would have ensured that a subset of unbroken chains of most likely abusive fiscal associations – which includes but not constrained to preparations involving device of services-based mostly payments for the rental of business office room or machines – would have ongoing to satisfy the definition of ICA. As a result, CMS now proposes to once once more revise the definition of ICA this sort of that the MCR Ultimate Rule’s additional clause (as explained higher than) would be effective only if the compensation arrangement closest to the physician entails compensation for that physician’s personally executed solutions.

Successfully, for the huge greater part of prospective ICAs, CMS proposes to revert the definition of ICA again to the which means it after experienced (in material, if not in form) prior to the MCR Ultimate Rule.  Specifically, if the compensation received by the medical professional is for anything at all other than his or her personally performed products and services, the ‘old’ definition of ICA (as it was in impact right up until 2021) would be helpful once more.  Accordingly, the ‘old’ definition of ICA would implement yet again to unbroken chains of economic interactions where the health practitioner receives compensation for place of work room, for machines, for goods and materials, and/or for the providers of other folks (this sort of as an used nurse practitioner), and so forth.  Likewise, the ‘old’ definition of ICA would very possible utilize all over again to any arrangement with a physician corporation, such as for the companies of its medical professionals (considering that the organization’s medical doctor-homeowners would stand in its shoes and ‘receive’ payment for the solutions of other individuals, i.e., for the providers of the other medical professionals in the group).

Underneath the Proposed Rule, the ICA definitional clause added by the MCR Ultimate Rule, i.e., demanding inquiry into the nature of the ‘individual device of compensation’ gained by the health practitioner, would be efficient only if the compensation gained by the medical professional would be for his or her possess individually executed companies.  Efficiently, the more narrowing of the definition of ICA (as narrowed by the MCR Final Rule) would now only be realized when the referring doctor gets payment for his or her individually carried out services.

Proposed Definition of ‘Unit’

Soon after the publication of the MCR Last Rule, lots of in the regulated industry questioned the scope, that means, and simple application of the phrase ‘individual unit of compensation’, specifically when a medical doctor gets different types of payment (e.g., a income, an RVU-centered efficiency reward, and a reward for achieving high quality incentive benchmarks).  The Proposed Rule seeks to make clear this phrase by defining it.  Effectively, CMS proposes to determine the ‘individual unit’ as either (i) ‘service’, where by all compensation is based exclusively on the provider offered, or (ii) ‘time’, in all other cases, such as cases exactly where any a person of many bases of the physician’s payment is time-based mostly.  For occasion, if a medical doctor only gets payment for just about every RVU executed, or for supplying a teaching session, or is compensated only on a charge agenda for distinct providers (e.g., 95% of the Medicare price timetable), then the ‘unit’, for applications of the ICA definition, is ‘service’.  Even so, if the health practitioner receives a income, or is paid out a share of collections, or receives payment for each and every RVU in excess of a regular or quarterly threshold, then the ‘unit’ is ‘time’.  When a lot more than a single device of the similar type is used to compute the physician’s payment (e.g., $50 for support A, $75 for provider B, and $100 for services C), then every unit should be analyzed independently (together with for FMV) to identify no matter if an ICA has been effectuated.  Consequently, and for illustration, to the extent any a single payment timetable level exceeds the FMV of the according assistance, that payment fee would effectuate an ICA and the entirety of that ICA would need to satisfy an exception – very most likely the exception for ICAs (42 CFR 411.357(p)).

Proposed Definition of ‘Personally Carried out Services’

To aid in the application of the ICA definition when the physician gets compensation for individually performed services, CMS proposes to add regulatory textual content stating that “[s]ervices that are individually done by a physician… do not involve solutions that are carried out by any individual other than the physician…, like, but not restricted to, the referring physician’s… personnel, impartial contractors, team observe users, or people supervised by the physician….”  It is not clear whether this proposed regulatory textual content would include things like solutions done by an staff but furnished ‘incident to’ the physician’s personally carried out assistance.

Extra Proposed Revisions

CMS is also proposing particular Recent Procedural Terminology (CPT) and Healthcare Frequent Process Coding Technique (HCPCS) coding modifications. It is proposing to update the Code Listing each individual calendar quarter (as an alternative of each year) and offer 30 days’ advance notification of Code Checklist updates.  CMS also proposes to publish the Code Record entirely on the CMS web page and revise the definition of List of CPT/HCPCS Codes at § 411.351 to update the URL that suggests where the Code Checklist is released on the CMS internet site. CMS seeks comment on no matter whether extra or much less recurrent Code Listing updates would be appropriate.


[1] Sheppard Mullin’s critical analysis of this rulemaking may be found in this article.

Sheela Ranganathan, regulation clerk in the firm’s Washington, D.C. office, also contributed to this post.


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Nationwide Law Review, Volume XI, Amount 195