Proposed changes to the Physician Self-Referral Law (Stark Law) and other laws would give healthcare organizations more ability to avoid self-disclosure and refunds. The changes are expected to be finalized soon.

  • Many of the changes are aimed at inadvertent violations that do not pose real risk of improper activity.
  • Under current laws, inadvertent errors can be an automatic Stark violation.
  • Organizations could address innocent errors without needing to self-disclose.

Significant changes to the Physician Self-Referral Law (Stark Law), the federal Anti-Kickback Statute (AKS), and the Civil Monetary Penalties (CMP) Law are on hold but could be good news to healthcare organizations if they are finalized.

The HHS Office of Inspector General (OIG) and CMS published final rules to take effect Jan. 19, 2021, but the U.S. Government Accountability Office disputed the validity of the rules because they did not include a 60-day delay to the effective date, as required by law. Then, the Biden administration instituted a regulatory freeze on all such rule changes on Inauguration Day. It remains to be seen what the new administration will do with the rules.

(The HHS proposed changes are available online at: https://www.hhs.gov/sites/default/files/oig-nprm.pdf. The CMS changes can be found at: https://www.hhs.gov/sites/default/files/cms-stark-law-nprm.pdf.)

Welcomed by Healthcare Industry

The changes are a long time coming and would address some longstanding problems with existing law, says Gretchen Heinze Townshend, JD, partner with McGuireWoods in Chicago.

“They are changes that most in the healthcare industry have been clamoring for, for quite a while,” she says. “There is, in general, bipartisan and industrywide support for the rules.”

The proposed rules create more flexibility for providers to engage in relationships and various initiatives without violating laws, she says. A primary driver is the shift to value-based care, which prompts payers, including Medicare, to look for ways to compensate providers for quality and cost savings instead of paying fee-for-service.

“Another driver is the recognition that the strict liability nature of Stark has created a situation where even the best of intentioned providers screw up and have inadvertent violations. We call it a foot fault,” Townshend explains, referring to the tennis foul in which a player inadvertently steps over the service line when serving. “If you don’t check every single box on a particular Stark Law exception, you violate the law, full stop. Intentions don’t matter, and ignorance doesn’t matter.”

Some of those violations are procedural and do not actually change the risk profile of an arrangement, she says. The violations can be discovered in business transactions, such as investments or mergers and acquisitions, when financial records are reviewed. For instance, documents may lack signatures or not specify a term of one year. That can be a Stark violation, which makes every referral by the physician under that agreement illegal and improper, triggering a refund and self-report.

“Several years ago, CMS put in the self-disclosure protocol for inadvertent violations, and they have thousands of entries. Lots of reports like, ‘Whoops, we failed to amend an agreement that was in place with the updated compensation, and we paid different than what was in our contract,’” she explains. “There was no kickback, no perverse or improper incentives are in place there, just inadvertent violations. CMS has been bogged down by these self-disclosures.”

More Flexibility to Comply

The proposed rules would give providers more flexibility to comply with Stark and reduce the CMS burden of handling so many self-disclosures, Townshend says. For example, the rules would allow 90 days to complete documentation of an arrangement after it is in place. Inadvertent financial payments could be resolved within 90 days of discovering the error.

“It’s basically softening the rules a little bit under Stark to give a better defense to the idea that a foot fault is a per se violation of the law,” Townshend says. “They were trying to give providers, hospitals, compliance officers, and physicians more arrows in their quiver to both be innovative in their relationships going forward but also to defend any inadvertent violations without having to go through self-disclosure and say you owe a bunch of money.”

In a statement announcing the changes, HHS offered these examples of the potential benefits:

  • “In an effort to coordinate care and better manage the care of their shared patients, a specialty physician practice could share data analytics services with a primary care physician practice.
  • “Hospitals and physicians could work together in new ways to coordinate care for patients being discharged from the hospital. The hospital might provide the discharged patients’ physicians with care coordinators to ensure patients receive appropriate follow-up care, data analytics systems to help physicians ensure their patients are achieving better health outcomes, and remote monitoring technology to alert physicians or caregivers when a patient needs healthcare intervention to prevent unnecessary ER visits and readmissions.
  • “A physician practice could provide smart pill boxes to patients without charge to help them remember to take their medications on time. The practice also could provide a home health aide to teach the patient and the patient’s caregiver how to use the pill box. The pill box could automatically alert the physician practice and caregiver when a patient misses a dose so they could follow up promptly with the patient.”

(The HHS announcement is available at: https://public3.pagefreezer.com/browse/HHS.gov/31-12-2020T08:51/https://www.hhs.gov/about/news/2019/10/09/hhs-proposes-stark-law-anti-kickback-statute-reforms.html.)

No New Obligations

Townshend says she is confident the rules will take effect soon, once the Biden administration reviews the changes and all the administrative obligations are fulfilled.

The changes will not create any new obligation for healthcare organizations. Everything that is compliant with Stark and AKS now will be compliant once the final rule becomes effective. The changes do create opportunities for compliance officers when they are conducting audits or evaluating physician relationships, she says. Inadvertent mistakes can be corrected without the need to disclose a Stark violation.

The changes also will open the way for more value-based care arrangements because inadvertent errors will not be automatic Stark violations that can sour a proposed business arrangement.

“Risk managers and compliance officers should be happy reading the proposed changes. They have new opportunities both to protect historic conduct and also to participate in new and innovative arrangements, and to have those protected more fully and more clearly than they were under the old rules,” Townshend says.