Changes to the Stark Law: Part I

Health Care Law Update

Date: February 03, 2016

Key Notes:

  • CMS recently finalized a new compensation exception under the Stark Law.
  • Permits hospitals and certain other entities to financially assist physicians in recruiting and compensating nonphysician practitioners who provide primary care or mental health care patient services.

The Centers for Medicare and Medicaid Services (CMS) recently finalized[1] several changes to the Stark Law to accommodate changes arising from health care reform and reduce the compliance burden on health care providers under the Stark Law. These changes include the addition of new exceptions to the referral prohibition related to compensation arrangements, and clarification and modification of existing exceptions. This Health Care Law Update is the first in a series describing the recent changes to the Stark Law.

Elements of Nonphysician Practitioner Exception

CMS added a new compensation exception[2] to assist with the recruitment and compensation of nonphysician practitioners (NPPs). The exception permits hospitals, federally qualified health centers (FQHCs) and rural health clinics (RHCs) to provide remuneration to a physician (or physician group) to compensate an NPP for providing primary care or mental health care patient services under certain conditions. Note that this exception is separate from the physician recruitment exception even though the two exceptions contain some of the same requirements.

The purpose of the new exception is to promote the expansion of access to primary care and mental health care services, as well as to address shortages in the delivery of primary care and mental health care. Primary care services include general family practice, general internal medicine, pediatrics, geriatrics, and obstetrics and gynecology patient care services.

Remuneration from hospitals, FQHCs and RHCs to physicians employing or contracting with NPPs is permitted when all eight of the following conditions are met:

  • The arrangement is set out in writing and signed by the hospital, physician and NPP.
  • The arrangement is not conditioned on the physician’s or NPP’s referrals to the hospital.
  • The remuneration from the hospital
    • Does not exceed 50 percent of the actual compensation, signing bonus and benefits (including health insurance, paid leave and other routine non-cash benefits offered to similarly situated employees of the physician practice) paid by the physician (or physician group) to the NPP during the first two consecutive years of the compensation arrangement between the NPP and the physician (or physician group).
    • Is not determined in a manner that takes into account (directly or indirectly) the volume or value of any actual or anticipated referrals by the physician (or physician group) or the NPP (or any NPP in the physician’s group) or other business generated between the parties.
  • The compensation, signing bonus and benefits paid to the NPP by the physician (or physician group) do not exceed fair market value for the patient care services furnished by the NPP to patients of the physician’s practice.
  • The NPP has not, within one year of the commencement of his or her compensation arrangement with the physician (or physician group)
    • Practiced in the geographic area served by the hospital.
    • Been employed or otherwise engaged to provide patient care services by a physician or a physician organization that has a medical practice site located in the geographic area served by the hospital, regardless of whether the NPP furnished services at the medical practice site located in the geographic area served by the hospital.
      CMS explained that the one-year disqualification period serves to prevent gaming by rotating or cycling NPPs through multiple physician practices located in the geographic area served by the hospital.
  • The NPP has a compensation arrangement with the physician (or physician group), and substantially all (meaning at least 75 percent) of the services the NPP furnishes to patients of the physician’s practice are primary care services or mental health care services.
    Patient care services must be measured by one of the following: (a) the total time the NPP spends on patient care services documented by any reasonable means (including, but not limited to, time cards, appointment schedules or personal diaries); or (b) any alternative measure that is reasonable, fixed in advance of the performance of the services being measured, uniformly applied over time, verifiable and documented.
  • The physician does not impose practice restrictions on the NPP that unreasonably restrict the NPP’s ability to provide patient care services in the geographic area served by the hospital.
  • The arrangement does not violate the anti-kickback statute or any federal or state law or regulation governing billing or claims submission.
Other Requirements
Record Keeping

Records of the actual amount of remuneration by the hospital to the physician, and by the physician to the NPP, must be maintained for a period of at least six years and made available to the Secretary of Health and Human Services upon request.

Definition of NPP

“NPP” means a physician assistant, nurse practitioner, clinical nurse specialist, certified nurse-midwife, clinical social worker or clinical psychologist.

Definition of Referral

A “referral” under this exception means a request by an NPP that includes the provision of any designated health service (DHS) for which payment may be made under Medicare, the establishment of any plan of care by an NPP that includes the provision of such a DHS, or the certifying or recertifying of the need for such a DHS, but not including any DHS personally performed or provided by the NPP.

Definition of Compensation Arrangement

A “compensation arrangement” under this exception between a physician (or physician group) and an NPP

  • Means an employment, contractual or other arrangement under which remuneration passes between the parties.
  • Does not include an NPP’s ownership or investment interest in a physician organization.
Limitations on Usage of Exception

This exception may be used by a hospital, FQHC or RHC only once every three years with respect to the same referring physician. This limitation does not apply, however, to remuneration a hospital, FQHC or RHC pays to a physician to compensate an NPP for providing patient care services if:

  • The NPP is replacing an NPP who terminated his or her employment or contractual arrangement to provide patient care services with the physician (or physician group) within one year of the commencement of the employment or contractual arrangements.
  • The remuneration paid to the physician is provided during a period that does not exceed two consecutive years as measured from the commencement of the compensation arrangement between the NPP who is being replaced and the physician (or physician group).
Relocation Expenses

CMS confirmed that a hospital may provide assistance with relocation costs associated with the NPP joining the physician’s practice as long as:

  • The amount is included in the aggregate compensation from the physician to the NPP.
  • The assistance from the hospital does not exceed 50 percent of the actual compensation, signing bonus and benefits paid by the physician to the NPP.
  • The compensation to the NPP (including any amount associated with the relocation costs) does not exceed fair market value for the patient care services furnished by the NPP to the patients of the physician’s practice.
Conclusion

This new exception will help address the growing shortage of primary care and mental health care providers, and should help hospitals, FQHCs, RHCs and physicians attract and retain NPPs to their geographic areas. CMS clarified, however, that it does not intend for hospitals to permanently subsidize the physician’s cost of employing or contracting with an NPP. Therefore, some of the limitations in the exception are intended to guard against shifting the long-term costs of employing and contracting with NPPs from physician practices to hospitals.

Our Services

We help hospitals and physician practices develop agreements to utilize this new exception to the Stark Law, including the agreement between the hospital, NPP and the physician, and the agreement between the physician (or practice) and the NPP. We also assist hospitals in drafting policies and procedures associated with these arrangements.

FOR MORE INFORMATION

For more information, please contact:

Cori R. Haper
937.443.6856
Cori.Haper@ThompsonHine.com

John L. Green
937.443.6864
John.Green@ThompsonHine.com

or any member of our Health Care group.

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[1] Calendar Year 2016 Medicare Physician Fee Schedule Final Rule, 80 Fed. Reg. 70885-71386 (Nov. 16, 2015).

[2] 42 C.F.R. 411.357(x).