Kusserow on Compliance: CMS moves to ease Stark rules for providers and for CMS

In the face of the landmark Tuomey case decisions that have added teeth to the enforcement of the Stark laws, CMS has learned what providers have known for years: vagueness in the law requires more interpretation. CMS has been overwhelmed by the number of self-disclosures that require interpretation, especially those involving technical violations. Previously, the agency may not have been sympathetic to calls from providers about the burden, but once the Office of Inspector General (OIG) announced that it would not handle any Stark referrals not implicating the Anti-Kickback Statute (AKS), CMS was forced to accept all the self-disclosures. Once that occurred, need for some clarifications in the regulations became dramatically clear. In response to this problem, CMS published a Proposed rule, which, if implemented, would update the Stark law regulations to account for recent changes relating to health care reform and advancements in patient care and payment methodologies (Proposed rule, 80 FR 41686, July 15, 2015). CMS is requesting information from the health care community on whether “additional guidance or rulemaking is needed to relax or remove barriers to health reform initiatives without compromising fraud and abuse prevention.”

The focus of the Proposed rule is on some of the technical requirements, which should not rise to enforcement levels. These changes were included in the 2016 Medicare physician fee schedule regulation and address many potential modifications to the Stark law, including the creation of new exceptions and guidance on CMS’ interpretation of existing Stark law exceptions. The most significant changes would involve: (1) new exceptions under the law for time-sharing arrangements with physicians; (2) recruitment incentives for non-physician practitioners; and (3) recognition that certain technical violations, such as expired agreements, would not necessarily arise to a fraud or abuse enforcement action.

Time-sharing agreements

CMS proposed a new Stark exception for time-share arrangements recognizing that it is a common practice for hospitals to rent space to physicians for a small amount of time during a defined period of time to permit patient visits at a location other than their primary office, for the convenience of the patients, the physician, or both. Under the Proposed rule, this would be permitted if physicians pay their hospital-landlord on a prorated basis for the time they occupy the space, and for the staff and equipment they use. However, such rentals would have to comply with Stark exception requirements (e.g., leases, equipment rentals), the agreement would have to be in writing, and it would have to reflect payment at fair-market value (FMV).

Non-physician practitioners

CMS has taken note of the fact that there is a looming shortage of primary care physicians and has proposed a limited exception for hospitals, federally qualified health centers (FQHCs), and rural health clinics (RHCs) to provide remuneration to physicians to assist with recruitment and employment of non-physician practitioners who receive remuneration from the hospital. This could add more non-physician practitioners to fill the gap. The exception would include many of the standard Stark safeguards, such as a written agreement signed by the hospital and the physician as well as remuneration that does not take into account the volume and value of referrals. Comments are also being sought as to whether this exception should also apply to non-physician practitioners who are recruited as independent contractors.

Technical issues

CMS also noted receiving numerous self-referral disclosures that are procedural in nature with providers saying they are unclear whether an arrangement has to be memorialized in a single document that covers all aspects of the arrangement. CMS reported that while a single document provides “the surest and most straightforward means” of compliance, “a collection of documents evidencing the course of conduct between the parties may satisfy the writing requirement.” This could extend to a variety of arrangements.


CMS is requesting comments from the industry to assist them with these changes. The agency can expect nothing but support from the industry for these proposed changes. For those interested in reviewing the entire draft rule and provide comments, such must be done by September 8, 2015. This is also an opportune time for hospitals to have their physician arrangements reviewed for current compliance and to understand the implications of the Proposed rule changes. This should not be done by anyone involved in development of them, but by independent experts under direction of legal counsel.


Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

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Copyright © 2015 Strategic Management Services, LLC. Published with permission.