Practice Economics

Stark Law: More flexibility starting in 2016



Medicare has relaxed some requirements of the Stark Law through its 2016 fee schedule and created new exceptions for compensation arrangements under the statute. The changes make it easier to recruit nonphysician employees, share rental space, and operate on expired contracts without fear of violating the law.

“These rules show the government was seeking to give some flexibility in the area of Stark procedure or technical issues,” said Julie E. Kass, a Washington area health law attorney who specializes in Stark and antikickback laws. “I think what [the Centers for Medicare & Medicaid Services] was seeing, and the kinds of issues being disclosed, weren’t things that were going to raise the risk of fraud or abuse to the program. Recognizing that, they wanted to make sure there weren’t unnecessary concerns about these, or unnecessary [efforts].”

Julie E. Kass

Julie E. Kass

What should you know about the Stark Law modifications? Ms. Kass and Philadelphia-based health law attorney Karl A. Thallner Jr. discussed the latest changes in a recent interview.

Nonphysician recruitment

Starting in 2016, hospitals can assist in the recruitment of nonphysician health professionals for physician practices. In the past, hospitals could not because remuneration could be considered a compensation relationship between the hospital and the practice.

In the fee schedule final rule, CMS expands its definition of nonphysician provider to mean physician assistant, nurse practitioner, clinical nurse specialist, certified nurse-midwife, clinical psychologist, or clinical social worker. Hospitals, rural health clinics, and federally qualified health centers can provide recruitment assistance and retention payments to physician practices to employ nonphysician providers. CMS also loosened its original proposal that said the nonphysician provider would have to be a bona fide employee of the physician practice. Instead, they can be independent contractors as long as they contract directly with the practice, according to the final rule. Third-party companies do not qualify.

Karl A. Thallner Jr.

Karl A. Thallner Jr.

While the change is primarily positive, it does have limitations, Mr. Thallner said. The subsidy amount from the hospital for example, can be only 50% of employment costs and can last just 2 years.

“At some point, the practice is going to have to assume the full risk of the person,” he said. “But one might envision some scenarios where this might be helpful to physician practice in a community where there’s some need for start-up support.”

Holdover extension

Physicians who have compensation arrangements that fall under a Stark Law exception no longer need to panic if their agreement expires and they neglect to redraft a new contract. The 2016 rule releases doctors from potential violations if such an agreement expires, but the arrangement continues under the same terms.

In the past, doctors had a 6-month grace period to renew an arrangement agreement once the contract expired. CMS noted it receives numerous disclosures of actual or potential violations relating to writing requirements of compensation exceptions through the self-referral disclosure protocol, which allows providers and suppliers to disclose actual or potential violations of the physician self-referral law to CMS and authorizes the Health & Human Services department to reduce the amount potentially owed for disclosed violations. However, arrangements that continue beyond the 6-month period do not necessarily pose a risk of program or patient abuse, provided that the arrangement continues to satisfy the specific requirements of the applicable exception, the agency stated.

The agency has eliminated the time limitation on contract holdovers if the agreements meet requirements related to fair market value and so long as the compensation does not take into account the volume or value of referrals or other business generated between the parties.

“This one [is] helpful if you find you have an agreement that has slipped through the cracks,” Mr. Thallner said.

Practices should still be monitoring agreements after they expire to ensure that compensation levels remain appropriate and take efforts to redraft if changes are identified, he stressed.

Timeshare reprieve

Timeshare arrangements for office space, equipment, personnel, supplies, and other services are allowed starting in 2016.

Previously, physicians who did not require traditional office spaces could only lease from sources who could pose a referral relationship on a part-time basis and those rentals had to me meet specific rental criteria. The renter was required to have exclusive use of the space and 1-year contract.

CMS now acknowledges that in some cases – such as in rural or underserved areas – there may be a community need for short-term specialty services in which exclusive use of an office is not necessary. Under a timeshare arrangement, a hospital or local practice may ask a specialist from a neighboring community to use space owned by the hospital or practice on a limited or as-needed basis. Often, the specialist does not establish an additional office, but instead creates a timeshare-like arrangement for the space, equipment, and services necessary to treat patients.


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