“It seems as if, even for well-intentioned healthcare providers, the Stark Law has become a booby trap rigged with strict liability and potentially ruinous exposure…” That statement comes directly from the appellate opinion upholding a recent $237 million dollar judgment against a South Carolina hospital for violations of the Stark Law. 

Around the same time, the Centers for Medicare & Medicaid Services (“CMS”) released the proposed 2016 Physician Fee Schedule, which includes numerous proposed changes to the Stark Law. While the timing of these events is mere coincidence (unless, of course, you are a conspiracy theorist), healthcare providers and their attorneys are asking the question – is CMS trying to disarm the Stark booby trap or are the proposed changes simply just adding to the complexity? 

For the most part, industry experts seem to applaud the efforts of CMS for proposing changes that appear to ease the technical burdens of the Stark Law. These technical burdens relate to the numerous requirements under the Stark Law that arrangements between physicians and hospitals (or other DHS entities) must be in writing, signed by all parties, and for a set term. Some of the proposed changes addressing these technical burdens include:

Writing – to satisfy the requirement that arrangements be in writing, CMS will not require one, formal written document with all of the terms and conditions of the arrangement. A collection of writings will suffice. 

Signatures – the Stark Law already contains flexibility regarding the requirement that written documents memorializing certain arrangements be signed by the parties. CMS will provide more flexibility by extending the non-compliance period to 90-days, regardless of whether the late signature was inadvertent or not. 

Term – for the Stark Law requirements that mandate an arrangement last for at least 1 year, CMS does not require that the parties include definitive period or term in the written document(s). CMS will take a practical approach in this regard. If the arrangement, in fact, lasts for 1 year or more, as evidenced by contemporaneous writings or other information, CMS will deem this requirement satisfied.

CMS is also proposing two new exceptions designed to address time share leases and non-physician practitioners. For time share leases, CMS appears to finally acknowledge that the “exclusivity” requirement in the lease exception is overly burdensome. This new exception generally tracks the requirements of the lease exception, without the exclusivity piece. However, this new exception contains additional requirements that may undermine the exception’s application. For example, the exception is limited to situations in which the physician “tenant” (called a licensee) uses the space “primarily for the evaluation and management of the licensee’s patients.” CMS goes further to explain that the exception is designed to protect referrals for the Designated Health Services that are incidental to the patient’s evaluation and management visit and furnished contemporaneously with that visit.

With respect to non-physician practitioners, CMS is essentially extending the physician recruitment exception to non-physician practitioners. Funding to physicians for the purpose of recruiting and employing non-physician practitioners will be permitted if the non-physician practitioner is a bona fide employee and employed to furnish primary care services. These arrangements will be limited to the first two years of the non-physician practitioner’s employment and the permitted remuneration to the employing physician will be capped under a formula based on fair market value compensation of the non-physician practitioner. 

CMS also proposed other technical and substantive changes. 

With the proposed changes, CMS is certainly taking steps to disarm some of the perceived booby traps in the Stark Law. The proposed changes designed to alleviate the technical burdens seem to be rooted in common sense and will undoubtedly help save some otherwise non-compliant arrangements. That said, the overall complexities of the Stark Law, as exemplified by the new exceptions, are readily apparent. The only true fix may very well be to eliminate the entire law, just like our friend Pete Stark suggested.