Focus on Stark Law Changes: CMS’s Attempts to Simplify

As discussed in previous posts, on December 2, 2020, the Department of Health and Human Services (HHS), via the Centers for Medicare & Medicaid Services (CMS) published final regulations aimed at modernizing and clarifying various aspects of the Stark Law. The full text and preamble of the final Stark Law regulations can be found here. We previously summarized the changes here, and reviewed certain of the regulatory changes in more detail here and here. This post continues our line of posts that review and provide detail on the changes made in the 2020 Final Rule.

In its efforts to modernize and clarify the Stark Law, CMS took steps to make compliance with the Stark Law simpler. Some of these steps included: 1) limiting the definition of “designated health service” or “DHS;” 2) removing the period of disallowance provisions; and 3) adding an additional rule on temporary noncompliance.

DHS: CMS limited the definition of DHS (42 CFR §411.351) by providing that an inpatient hospital service is not considered DHS if the furnishing of the service does not increase the amount of Medicare’s payment to the hospital under the following prospective payment systems: (i) Acute Care Hospital Inpatient (“IPPS”); (ii) Inpatient Rehabilitation Facility (“IRF PPS”); (iii) Inpatient Psychiatric Facility (“IPF PPS”); or (iv) Long-Term Care Hospital (“LTACH PPS”).  This change only applies to inpatient services. It has the potential to significantly lessen the liability of hospitals under the Stark Law.

Period of Disallowance: The period of disallowance is the period of time during which a physician may not make referrals for DHS to an entity and the entity may not bill Medicare for the referred DHS because the financial arrangement between them fails to satisfy any applicable Stark Law exception. CMS has modified the exact starting and stopping points of the period of disallowance over the years. Prior to the 2020 Final Rule, it defined the period of disallowance as beginning on the date the financial relationship fails to satisfy an exception and ending on the date it is brought back into compliance. But if the noncompliance is related to compensation, the period of disallowance would not end until the excess compensation is repaid or the additional required compensation is paid (in addition to the arrangement as a whole being in compliance). It could also end when the financial relationship ends. CMS stated that the period of disallowance provisions had been put in place to establish an “outside, bright line limit.” However, it determined the rules, as applied, were “overly prescriptive and impractical.” In response, CMS chose to delete the period of disallowance provisions entirely. Therefore, as of the effective date, January 19, 2021, the determination of what time period constitutes the period of disallowance must be made on a case-by-case basis taking into account the facts and circumstances of the specific compensation arrangement.

Noncompliant Arrangements: CMS determined that payment discrepancies that are identified and rectified in a timely manner should not cause an arrangement to fall out of compliance with the Stark Law. Accordingly, it codified a new special rule at 42 CFR § 411.353(h). This subsection provides that as long as the arrangement otherwise complies with an applicable exception, and the parties to the arrangement reconcile all discrepancies in payments under the arrangement within 90 calendar days following expiration or termination of the arrangement, the entity may bill for DHS.