The Centers for Medicare & Medicaid Services (“CMS”) recently issued the 2016 Physician Fee Schedule (“PFS”), which is expected to be published in the November 16, 2015 Federal Register. Along with payment updates for services furnished on or after January 1, 2016, highlights of the PFS include final revisions to the physician self-referral law (“Stark Law”) and the regulations regarding opting out of Medicare and private contracting. Specifically, CMS added two new exceptions to the Stark Law, clarified other provisions of the Stark Law, and implemented automatic renewal for opt-out periods. The PFS also finalizes separate payment codes for advance care planning services.

Stark Law Revisions

Generally, the Stark Law prohibits physicians from referring Medicare patients for certain designated health services (“DHS”) to an entity with which the physician or a member of the physician’s immediate family has a financial relationship – unless an exception applies. Many recent statutory changes, including changes implemented under the Affordable Care Act, have affected the Stark Law. CMS implements revisions to the Stark Law regulations in the PFS to conform with statutory changes, to clarify the regulations, and to expand access to healthcare. The revisions to the Stark Law in the PFS are issued as a final rule with a comment period. CMS will accept comments on the final rule until December 29, 2015.

New Exceptions

Exception for Assistance to Compensate a Nonphysician Practitioner (“NPP”)

CMS finalized an exception permitting remuneration from a hospital, federally qualified health center (“FQHC”) or rural health center (“RHC”) to a physician to assist the physician in engaging a NPP to provide primary care or mental health services in the geographic area served by the hospital, FQHC, or RHC. In finalizing the exception, CMS expanded the exception from the proposed rule to include a broader list of providers in the definition of NPP, to provide flexibility on the relationship between the NPP and physician or physician organization, and to make the exception applicable to NPPs providing mental health services or primary care services.

The new exception requires that:

  1. the arrangement is set out in writing and signed by the physician, the NPP, and the hospital, FQHC, or RHC;
  2. the arrangement is not conditioned on the physician’s or NPP’s referrals to the hospital, FQHC, or RHC;
  3.  the remuneration paid to the physician is not determined in a manner that takes into account the volume or value of referrals by the physician or the NPP, and does not exceed 50 percent of the actual compensation, signing bonus, and benefits paid by the physician to the NPP in a period not to exceed the first two years of the arrangement between the NPP and the physician and;
  4. the compensation, signing bonus, and benefits paid to the NPP by the physician do not exceed fair market value;
  5.  the NPP has not practiced in the same geographic area or been employed or engaged by a physician that has a site in the same geographic area within one year of the commencement of the compensation arrangement with the physician;
  6. substantially all (at least 75%) of the services that the NPP furnishes to patients of the physician’s practice are primary care services or mental health care services;
  7. 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; and
  8. the arrangement does not violate the anti-kickback statute or any federal or state law or regulation governing billing or claims submission.

For purposes of the exception, NPP is defined as a physician assistant, a nurse practitioner, a clinical nurse specialist, a certified nurse-midwife, a clinical social worker, or a clinical psychologist. A direct compensation arrangement between the physician or physician organization and the NPP must exist, but that relationship may be an employment relationship or a contractor relationship. Records of the actual amount of remuneration by the hospital, FQHC, or RHC to the physician, and by the physician to the NPP, must be maintained for a period of at least six years. A hospital, FQHC, or RHC may only provide remuneration to the same physician under this new exception once every three years, except in cases where the NPP for whom the physician received assistance did not remain with the physician for at least one year.

Exception for Timeshare Arrangements

CMS also finalized an exception permitting remuneration provided under timeshare arrangements for the use of premises, equipment, personnel, items, supplies, or services. This exception may potentially apply to many arrangements known as timeshares or block leases, which have historically required careful structure to comply with several Stark Law exceptions because of the different components of the arrangements.

The following conditions must be met for an arrangement to fall within this exception:

  1.  The arrangement is set out in writing and specifies the premises, equipment, personnel, items, supplies, and services covered by the arrangement;
  2.  The arrangement is between a physician and a hospital or a physician organization of which the physician is not an owner, employee, or contractor;
  3.  The premises, equipment, personnel, items, supplies, and services covered by the arrangement are used predominantly for the provision of evaluation and management (“E/M”) services to patients, which are provided on the same schedule;
  4. The equipment covered by the arrangement (a) is located in the same building where the E/M services are furnished (b) is not used to furnish DHS other than those incidental to the E/M services furnished at the time of the patient’s E/M visit, and (c) is not advanced imaging equipment, radiation therapy equipment, or clinical or pathology laboratory equipment;
  5. The arrangement is not conditioned on the referral of patients;
  6.  The compensation over the term of the arrangement is set in advance, consistent with fair market value, and not determined (a) in a manner that takes into account the volume or value of referrals or other business generated between the parties, (b) using a formula based on a percentage of the revenue, or (c) using a formula based on per-unit of service fees (also known as “per-click” fees) other than time-based units;
  7. The arrangement would be commercially reasonable even if no referrals were made between the parties;
  8. The arrangement does not violate the anti-kickback statute or any federal or state law or regulation governing billing or claims submission; and
  9.  The arrangement must not convey a possessory leasehold interest in the office space that is the subject of the arrangement.

CMS specifically states that this exception will not apply where the use of office space by the physician is solely or primarily to furnish DHS to patients, but instead must relate to office space used predominately for E/M services. Parties may determine “predominant” use through any reasonable, objective and verifiable means. CMS also detailed that this exception does not prohibit compensation using a formula that is time-based, such as per-hour or per-day.

Other Revisions

Other notable revisions to the Stark Law regulations in the PFS include:

  • Clarification that the writing requirement in certain Stark Law exceptions may be met with a single agreement or a collection of documents that would, as a whole, satisfy the writing requirement. CMS noted that determining if a collection of documents satisfies compliance with the writing requirement is a fact-specific determination.
  • Clarification that the term requirements of the Stark Law exceptions for rental of office space, rental of equipment, and personal service arrangements need not be met through a formalized “term” provision in a written contract. Rather, an arrangement need only last at least one year as a matter of fact to satisfy the term requirement.
  • Amendment of the holdover provisions in the exceptions for rental of office space, rental of equipment, and personal service arrangements to permit indefinite holdovers, and to the exception for fair market value compensation to permit renewals of any length of time. Holdovers must continue on the same terms and conditions as the original arrangement and arrangements must satisfy all elements of the applicable exception at expiration and on an ongoing basis during the holdover.
  • Amendment to the regulations such that the term “takes into account” is used consistently and in place of “based on” and “without regard to” in reference to volume or value standards in the Stark Law exceptions. This change reflects CMS’s longstanding policy that the volume or value standard in exceptions should be interpreted uniformly.

Private Contracting/Opt-Out

The PFS finalizes revisions to the regulations governing the procedures and requirements for certain physicians and practitioners to opt out of Medicare and to provide services that would otherwise be covered by Medicare through private contracts. The changes conform the regulations to statutory changes implemented under the Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”). The term of an opt-out period for a physician or practitioner remains at two years and an individual must file an affidavit with CMS to opt-out. However, pursuant to the MACRA amendments and regulatory revisions in the PFS, it is no longer necessary to file a new affidavit every two years to extend an opt-out. Instead, for individuals who filed opt out affidavits on or after June 16, 2015, opt-out status will automatically renew for additional two-year periods unless the physician or practitioner cancels the automatic extension by notifying CMS at least 30 days prior to the next two-year opt-out period.