The New Stark and AKS Laws

Stark Law and the Anti-Kickback Statute (AKS) both govern the ways medical practices can do business. The laws generally govern the legality and illegality of referrals between physicians and non-physicians. Stark law essentially provides that referrals between a physician and a designated health practice (DHS). are illegal if the physician (or a relative) has a financial interest in the DHS.  The laws were enacted to ensure physicians make medical decisions for their patients based on the best interests of the patient and not the financial interests of the physician.

The AKS provides that physicians cannot accept financial inducements in order to make referrals. Stark Law does have a number of exceptions which, If used properly, can help show a physician or medical practice is in compliance. The AKS has similar, but not identical, “safe harbors” that can be used to show compliance.

In 2020, the US Department of Health and Human Services Office of Inspector General (OIG) and the Centers for Medicare and Medicaid Services (CMS) authorized changes to these two referral laws. Some of the changes were effective in 2021. Other changes were made effective January 1, 2022, to give physicians time to come into compliance. The deadline has now passed and medical practices need to consult with experienced healthcare lawyers to understand their Stark and AKS compliance requirements.

The Stark Law changes

The new regulations can be found here.

The Stark Law exceptions generally provide exceptions for ancillary services provided certain conditions are met. The new laws provide new definitions and new conditions.

Designated Health Services (DHS)

The new regulations limit how far Stark Law can reach to inpatient services that increase the amount Medicare pays. The precise language is:

For services furnished to inpatients by a hospital, a service is not a designated health service payable, in whole or in part, by Medicare if the furnishing of the service does not increase the amount of Medicare’s payment to the hospital under any of the following prospective payment systems (PPS):

(i) Acute Care Hospital Inpatient (IPPS)

(ii) Inpatient Rehabilitation Facility (IRF PPS)

(iii) Inpatient Psychiatric Facility (IPF PPS) or

(iv) Long-Term Care Hospital (LTCH PPS).

This means that an inpatient hospital service is not considered a DHS if the service doesn’t increase the amount of Medicare payments to the hospital. The new regulation does not apply to outpatient hospital services.

Remuneration

The new regulations provide a new definition of remuneration that essentially provides that certain acts including the following are not considered remuneration –

(1)   The forgiveness of amounts owed for inaccurate tests or procedures, mistakenly performed tests or procedures, or the correction of minor billing errors.

(2)   The furnishing of items, devices, or supplies that are, in fact, used solely for one or more of the following purposes:

(i)      Collecting specimens for the entity furnishing the items, devices or supplies

(ii)     Transporting specimens for the entity furnishing the items, devices or supplies

(iii)    Processing specimens for the entity furnishing the items, devices or supplies

(iv)    Storing specimens for the entity furnishing the items, devices or supplies

(v)     Ordering tests or procedures for the entity furnishing the items, devices or supplies; or

(vi)    Communicating the results of tests or procedures for the entity furnishing the items, devices or supplies.

(3)   other conditions set forth in the new regulations

Ancillary services 

One of Stark Law’s exceptions is for in-office ancillary services (IOAS) that allows doctors to refer to a DHS where the doctor or group practice bills Medicare – and if other conditions involving the location of the DHS, who bills for the service, and other factors such as durable medical equipment factors are met including restrictions on the profits of the DHS. The new regulations clarify the “profits” definition by:

• Determining to what extent the volume or value of referrals can be considered.
• Updating the definition of “overall profits,” in various respects such as where the group has at least five physicians and the requirements for paying productivity bonuses.

Skilled healthcare lawyers will also explain the concept of “split pooling,” Generally, split-pooling is prohibited under the new regulations.

The new regulations also clarify the time physicians and medical practices have to come into compliance.

Value-Based Adjustments

The original Stark Law was enacted when most medical practices used a fee-for-service model. The new regulations were enacted, in part, to address newer medical payment models. The new regulations for value-based payments focus on the risk the health provider is taking. Essentially, the more risk the physician is taking, the less medical scrutiny.  The aim is to focus on patient outcomes and cost savings.

Physician pay

The new rules provide for a yearly $5,00 compensation exemption between the physician/practice and the DHS for professional services, rental of equipment, office space, and staffing. These payments can be accepted (with conditions) without having a written agreement. Your healthcare lawyer can explain the requirements to meet this exemption in more detail.

A cybersecurity exception

The new laws now exempt donating technology and technical services to protect patient data and make medical databases more secure. The prior Stark Law allowed for exemptions provided physicians paid part of the expenses. Now donations can generally be made in full.

Fair Market Value

According to the National Law Review:

“With regard to fair market value, CMS generally attempted to return to the statutory definition of fair market value and better align fair market value with the “general market value” of a subject transaction, thus ostensibly allowing parties to consider more specific circumstances surrounding the particular arrangement than overly relying on the four corners of a salary survey.” “CMS notes that salary surveys can be a good “starting point” but that the fair market value for a particular physician may be higher or lower than the survey data.”

More Stark Law definitions

Many other terms have new definitions including – Commercial reasonableness, fair market value, and others.

Other CMS changes (known as the Patients Over Paperwork Initiative) include:

• “Finalizing new, permanent exceptions for value-based arrangements to that will permit physicians and other health care providers to design and enter into value-based arrangements without fear that legitimate activities to coordinate and improve the quality of care for patients and lower costs would violate the physician self-referral law. “These exceptions aim to coordinate care and payment models across Medicare, Medicaid, and private plans.”
• Finalizing the guidance physicians need regarding self-referral law exceptions.
• Reducing administrative burdens that increase costs so the money can be spent on patient care.

The AKS changes

According to the National Review, the OIG provides for new safe harbors and modifications to existing safe harbors:

The new safe harbor include:

“Value-Based Arrangements. OIG finalized three new safe harbors to protect certain payments among individuals and entities in a value-based arrangement. The three new safe harbors vary in terms of the type of remuneration that can be provided, the level of financial risk the parties assume (full, substantial downside and no risk), and the types of safeguards required to satisfy the safe harbor. The value-based safe harbors are generally narrower than the Stark exceptions.”

“OIG also prohibits the following entities from being able to rely on the value-based safe harbors:

• Pharmaceutical manufacturers, distributors, and wholesalers
• Pharmacy benefit managers
• Laboratory companies
• Compounding pharmacies
• Medical device and supply distributors and wholesalers.”

Other safe harbors include:

• Patient Engagement and Support.
• CMS-Sponsored Models.
• Cybersecurity Technology and Services.

The following safe harbors were modified by the OIG:

• Personal Services and Management Contracts Safe Harbor.
• Local transportation.
• Electronic Health Records Items and Services.
• Warranties.
• Accountable care organization (ACO).

MSOs and the new OIG and CMS self-referral regulations

One of the ways healthcare lawyers recommend physicians and medical practices consider – to help show compliance with self-referral laws is to use a Medical Service Organization (MSO). We’ve written about the advantages of an MSO previously:

“Managed Service Organizations (MSOs) are designed to help physicians and other health providers with the non-clinical, administrative part of their medical practice—and to grow the business side of healthcare.”

“Often, MSOs supply the business side of the medical or healthcare practice with human resources, payroll and benefits, compliance, and other non-medical matters. While MSOs mainly provide services for physicians, MSOs can help hospitals and other medical ventures. MSOs can be owned by different entities including hospitals, physician groups, investors, and others.”

MSOs give the physician/medical practice a way for the practice to focus on practicing medicine.

For an MSO arrangement to meet the financial relationship and self-referral definitions, it is crucial to create the MSO so that the MSO meets one of the listed exceptions. These exceptions include:

• Personal Service Arrangements.
• The Fair Market Value Exception.
• Rental of Office Space and Equipment.
• Payments by a Physician for Items and Services

The common threads to these safe harbors are:

• “The MSO relationship should be in writing.
• The relationship term should be a year or more.
• The total amount of payments including for the office space, equipment, and services, should be established in advance.
• If the relationship contract doesn’t anticipate “full-time services,” the agreement must properly address the part-time arrangement.
• The payments should be based on the fair market value of the space, equipment, or services and can’t change based on the value or volume of “Medicare or state health care program-covered referrals or business generated between the parties.””

How the new Stark changes (CMS) and AKS changes (OIG) affect MSOs.

Physicians and medical practices should speak with an experienced health care lawyer now regarding the new laws. The laws may affect your compliance requirements. For example, as discussed above, the definitions of a group practice and fair market value have changed. The methods of payment have changed. Some of these changes may directly impact how the MSO operates and the relationship between the physician/practice and the MSO.

The new Stark and AKS regulations from CMS and the OIG are now effective. Healthcare providers need to understand how these new changes affect the referrals they make and receive. The new laws provide new definitions and change some of the Stark law exceptions and AKS safe harbors. An experienced healthcare lawyer can explain how using and MSO can help meet these updated exceptions and safe harbors.

Physicians, medical practices, ancillary companies, and MSOs should contact Cohen Healthcare Law Group, PC to discuss Stark Law, AKS, and other laws that affect any type of referrals. Our experienced healthcare attorneys help health providers and businesses understand how a manage service organization can help show Stark and AKS compliance.