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On December 20, 2019, the Federal appeals court panel that heard U.S. ex rel. Bookwalter v. UPMC, No. 18-1693 (3d Cir.), amended its September 2019 opinion by removing a controversial interpretation of the “volume or value” standard under the Stark Law.  The September opinion had adopted a “correlation theory,” holding that a physician’s compensation “varies with” the volume or value of referrals if the physician is paid based on his personally performed services, such as on a work relative value unit (wRVU) basis, and there is a “correlation” between the physician’s referrals and those personally performed services.  The court relied on this correlation theory to support its finding that the physicians had an indirect compensation arrangement with the hospitals to which they referred, thereby allowing the case to proceed and shifting the burden to the defendants to prove the availability of a Stark Law exception.  Although the amended December opinion removed the correlation theory rationale, the court maintained its September holding to allow the case to proceed based on alternative reasoning that there were adequate allegations that the physicians’ compensation “took into account” their referrals.

Background

The Stark Law prohibits a physician’s Medicare referrals for “designated health services,” including hospital services, to an entity with which the physician has a direct or indirect financial relationship, unless the requirements of an applicable exception are satisfied.  One element of the Stark Law’s test to determine whether a physician has an indirect compensation arrangement with an entity is whether the physician’s aggregate compensation “varies with, or takes into account, the volume or value of referrals” to the entity.  For these reasons, a critical component in a Stark Law analysis is frequently whether a referring physician is compensated in a manner that “varies with” or “takes into account” the volume or value of his referrals.
Continue Reading Federal Appeals Court Amends Stark Law Opinion to Remove Controversial “Volume or Value” Interpretation, but Uncertainty Remains

The Centers for Medicare & Medicaid Services (CMS) has published its final Medicare physician fee schedule (PFS) rule for calendar year (CY) 2020.  In addition to updating rates for physician services, the final rule revises numerous other Medicare Part B policies.  Highlights of the final rule include the following: 

  • The final 2020 conversion factor is

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As previously reported, the Department of Health and Human Services has published highly anticipated proposed changes to align the regulations under the Physician Self-Referral Law, the federal Anti-Kickback Statute, and the Civil Monetary Penalties Law with value-based health care arrangements.  Reed Smith is providing a series of client alerts and teleseminars that analyze key…

Today, the Department of Health and Human Services (HHS) announced proposed changes to modernize the regulations that interpret the Physician Self-Referral Law (the Stark Law) and the Federal Anti-Kickback Statute. In a press release, HHS states these proposed rules are intended to “provide greater certainty for healthcare providers participating in value-based arrangements and providing coordinated care for patients . . . while maintaining strong safeguards to protect patients and programs from fraud and abuse.”

Over the last 30 years, HHS has issued a series of final regulations establishing exceptions and safe harbors that limit the reach of the Stark Law’s strict liability civil penalties and the Anti-Kickback Statute’s criminal penalties to protect from enforcement certain non-abusive and beneficial arrangements. These final regulations have not, however, reflected the significant shift in recent years in health care delivery and payment systems from a fee-for-service model to models based on improving value and quality of care provided to patients. As a result, many in the health care industry identify these laws, as well as the Civil Monetary Penalty (CMP) Law, as barriers to more effective care coordination and management that can deliver value-based care to improve quality of care, health outcomes, and efficiency. In response, on June 25, 2018, the Centers for Medicare & Medicaid Services (CMS) published a Request for Information seeking input on how it could address existing Stark Law barriers to these emerging value-based payment and delivery systems. Similarly, on August 27, 2018, the Office of Inspector General (OIG) published a Request for Information seeking feedback on how OIG could modify or add new safe harbors addressing these barriers. CMS and OIG received more than 350 comments each, which HHS has considered in publishing these proposed rules.

CMS and OIG Coordinated Proposals

The proposed rules, which span hundreds of pages, reflect close coordination between CMS and OIG, which tried to align the regulations, where appropriate, and the proposals are significant. More specifically, the coordinated proposals include:

  1. Three new exceptions and safe harbors for value-based payment arrangements
  2. Modifications to the existing electronic health record (EHR) exception and safe harbor
  3. The addition of a new exception and safe harbor related to the provision of cybersecurity technology and services

Continue Reading Proposed Rules to Modernize Stark Law and Anti-Kickback Statute Released Today

The Centers for Medicare & Medicaid Services (CMS) has published its proposed Medicare physician fee schedule (PFS) rule for calendar year (CY) 2020.  In addition to updating rates for physician services, CMS proposes changes to numerous other Medicare Part B policies.  Highlights of the proposed rule include the following:

  • The proposed 2020 conversion factor (CF)

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Representatives Jackie Speier (D-California) and Dina Titus (D-Nevada) have introduced HR 2143, the Promoting Integrity in Medicare Act of 2019 (PIMA), which – if enacted – would narrow the “Stark” law’s exceptions and have a direct impact on the services provided by physicians who self-refer for the performance of certain designated health services. The 2019…

The Trump Administration’s proposed fiscal year (FY) 2020 budget includes extensive health policy provisions – as evidenced by the 162-page Department of Health and Human Services (HHS) “Budget in Brief.”  This summary focuses on the major Medicare and Medicaid proposals most directly impacting providers and suppliers; note that we discuss the Administration’s proposed prescription drug reimbursement provisions in a separate blog post.

Medicare, Value-Based, and Related Reforms

The Administration estimates that its Medicare policy reforms would save approximately $811 billion over 10 years.  The Administration states that these proposals are “designed to improve value-based systems of care, exercise fiscal integrity, promote competition, reduce provider burdens, improve the appeals system, and address high drug prices.”  Budget provisions that would result in significant Medicare savings include the following (savings are over the 10-year period of FYs 2020-2029): 

  • A new process to distribute uncompensated care payments to hospitals based on share of charity care and non-Medicare bad debt. [$98.0 billion net]
  • Site neutral payments between on-campus hospital outpatient departments and physician offices for certain services (e.g., clinic visits). [$131.4 billion]
  • Payment for all off-campus hospital outpatient departments under the physician fee schedule (PFS) effective CY 2020. [$28.7 billion]
  • A unified post-acute care system for skilled nursing facilities, home health agencies, inpatient rehabilitation facilities, and long-term care hospitals (LTCHs) beginning in 2025. [$101.2 billion]
  • An increase in the intensive care unit minimum stay threshold from three days to eight days in order to qualify for payment under the LTCH prospective payment system. [$10.0 billion]
  • A reduction in Medicare reimbursement of bad debt from 65% to 25% over three years beginning in FY 2020. [$38.5 billion]
  • Expansion of the durable medical equipment (DME), prosthetics, orthotics, and supplies (DMEPOS) competitive bidding program to all areas of the country. The proposal also would reimburse contract suppliers based on their own bids rather than a single payment amount.  [$7.1 billion]
  • Consolidation of federal spending for graduate medical education (GME) programs. [$211.8 billion in Medicare savings].

Other legislative proposals intended to promote value-based care that are not expected to have a budget impact include the following:
Continue Reading Trump Administration Calls for Medicare/Medicaid Cuts, Program Reforms in FY 2020 Budget Proposal

The Centers for Medicare & Medicaid Services (CMS) has issued its proposed Medicare physician fee schedule (PFS) rule for calendar year (CY) 2019.  In addition to updating rates for physician services, the sweeping rule proposes changes to numerous other Medicare Part B policies.  Highlights of the proposed rule include the following:

  • CMS proposes a

…

The House Ways and Means Health Subcommittee has scheduled a July 17, 2018 hearing on “Modernizing Stark Law to Ensure the Successful Transition from Volume to Value in the Medicare Program.”  In announcing the hearing, Subcommittee Chairman Peter Roskam stated that “the lack of Stark modernization is a clear barrier to reforms that reward better…

As part of its “Regulatory Sprint to Coordinated Care,” the Centers for Medicare & Medicaid Services (CMS) is seeking input on how it can address “unnecessary obstacles to coordinated care, real or perceived, caused by the physician self-referral law.” CMS Administrator Seema Verma acknowledged in a recent blog post that “[i]n its current form, the…

The Trump Administration has released its fiscal year (FY) 2019 budget proposal, which includes extensive health policy provisions. While most of the President’s policy proposals for Department of Health and Human Services (HHS) programs would require Congressional approval, others are characterized as administrative proposals that presumably would not involve Congress.
Continue Reading Trump Administration’s Proposed FY 2019 Budget Targets Medicare, Medicaid for Savings, Seeks (Again) to Repeal/Replace ACA

The House Ways and Means Committee has approved legislation to create an alternative pathway to resolve certain technical violations of the Stark physician self-referral law. The bill, HR 3726, would allow an entity or individual to voluntarily disclose previous inadvertent technical noncompliance (e.g., the arrangement is not signed by one or more parties to…

While the Capitol Hill spotlight is focused on the Senate debate on legislation to repeal or revise the Affordable Care Act, the House of Representatives quietly approved by voice vote HR 3178, the Medicare Part B Improvement Act of 2017. The bipartisan bill would impact a number of Medicare policies, including the Stark physician self-referral law, home infusion therapy and dialysis service policies, and documentation requirements for orthotics and prosthetics. In particular, the bill would:
Continue Reading With All Eyes on Senate ACA-Repeal Debate, House Passes Bill to Tweak Stark Law and Other Medicare Part B Policies

CMS has released a new Self-Referral Disclosure Protocol (SRDP) Form for disclosing actual or potential violations of the physician self-referral law (known as the “Stark Act”) under CMS’s existing self-disclosure process. According to CMS, the streamlined and standardized format “will reduce the burden on providers and suppliers submitting disclosures to the SRDP” and facilitate CMS…

The Department of Health and Human Services (HHS) is once again applying an inflation increase to maximum civil monetary penalty (CMP) amounts for HHS agencies and programs – less than five months after the last inflation hike and notwithstanding the Trump Administration’s recently-announced regulatory freeze.  Specifically, in a final rule to be published on…

The Centers for Medicare & Medicaid Services (CMS) has issued its final Medicare physician fee schedule (MPFS) for calendar year (CY) 2017.  In addition to updating MPFS rates and policies, the final rule makes numerous other Medicare policy changes, including updates to Stark Law regulations related to unit-based compensation and new enrollment requirements for providers and suppliers furnishing services to Medicare Advantage (MA) enrollees.  Highlights of the rule include the following:
Continue Reading CMS Publishes Final Rule Updating 2017 Medicare Physician Fee Schedule Rates and Policies

The Department of Health and Human Services (HHS) is increasing maximum civil monetary penalty (CMP) amounts applicable to HHS agencies and programs, in compliance with the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (which was part of the Bipartisan Budget Act of 2015).  The magnitude of the individual CMP increases varies depending on when the specific type of penalty was last adjusted and consequently how large a “catch-up” adjustment is applied.  Increases range from 1% to 150%.  For instance:
Continue Reading HHS Inflation Adjustment Rule Hikes CMPs Across Department Programs

The Centers for Medicare & Medicaid Services (CMS) has published its proposed rule to update the Medicare physician fee schedule (MPFS) for calendar year (CY) 2017. The proposed rule contains numerous Medicare payment and policy proposals, including consideration of potentially misvalued codes, revisions to diagnostic imaging policies, updates to Stark Law regulations, and new enrollment requirements for providers and suppliers furnishing services to Medicare Advantage enrollees. Highlights of the sweeping rule include the following:
Continue Reading CMS Proposes Medicare Physician Fee Schedule Update for 2017