In July, the Centers for Medicare & Medicaid Services (CMS) published a draft update to the Medicare Physician Fee Schedule for 2016, which included proposals that aim “to reduce burden and to facilitate compliance” under the physician self-referral law known as the Stark Law (the “Proposed Rules”). The Proposed Rules would clarify some regulations, relax certain technical requirements and create new exceptions.

The Proposed Rules include two new exceptions to Stark, which would:

  1. Allow payments to physicians to assist with the recruitment and employment of non-physician practitioners. The proposed exception, designed to address shortages of primary-care physicians, applies to hospitals, Federally Qualified Health Centers (FQHCs), and Rural Health Clinics (RHCs).
  2. Permit timeshare arrangements established for the use of office space, equipment, personnel, supplies and other services. Timeshare arrangements already exist within the healthcare sphere in many areas, and this exception will provide specific guidance for how to structure those arrangements in a Stark-compliant manner.

Additionally, the Proposed Rules include a modification related to physician-owned hospitals. While the Affordable Care Act has already included a limitation on the maximum percentage ownership that physicians may hold in a physician-owned hospital, the proposed regulatory changes clarify that the maximum percentage must be calculated by including all physician owners, regardless of whether they refer to the hospital or not. This change could require certain physician-owned hospitals to reduce some of their physician ownership in order to comply.

The Proposed Rules also provide clarification on compensation paid to a physician organization, stating that it must take into account referrals of any physician in the organization. The Proposed Rules would deem all physicians to be parties to the arrangement, including employed physicians, non-owner physicians and independent contractors.

The clarifications and modifications to Stark under the Proposed Rules are currently only CMS draft regulations, and comments on the Proposed Rules will be accepted by CMS until September 8, 2015, with the final rule to be issued by November 1st. A copy of the full text of the Proposed Rules as published in the Federal Register is available here.  

While the Proposed Rules will likely be welcomed by many, they generally provide minor relief for smaller technical violations, and the Stark Law and its implementing regulations will remain incredibly complex.Therefore, providers should maintain a high degree of vigilance in their quest to ensure compliance with the Stark Law.