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Proposed Stark regulations have an immediate compliance impact

Charles B. Oppenheim (coppenheim@health-law.com) is a Partner in the Los Angeles office and Amy Joseph (ajoseph@health-law.com) is a Partner in the Boston office of Hooper Lundy & Bookman P.C.

In October 2019, the Centers for Medicare & Medicaid Services (CMS)[1] and Health and Human Services Office of Inspector General (OIG)[2] issued highly anticipated proposed rules as part of the Regulatory Sprint to Coordinated Care, which aims to reduce regulatory barriers and encourage transition to value-based care. The proposed rules are notable, because both agencies respectively acknowledge the broad reach of the federal Anti-Kickback Statute (AKS) and the Stark Law (aka, the federal Physician Self-Referral Law) as potentially inhibiting beneficial and non-abusive arrangements, and both agencies propose significant modifications to help address these issues. Much of the attention has been focused on the proposed new AKS safe harbors and Stark Law exceptions for value-based arrangements, and these are certainly significant developments.

Equally important, however, and critically important to current compliance efforts, the proposed Stark Law regulations include a number of clarifications by CMS of its existing position with respect to two key phrases that historically created compliance uncertainty: “commercially reasonable” and “taking into account the volume or value of referrals or other business generated.” These clarifications are extremely helpful, because they help mitigate risk of exposure that has been increasing in recent years for standard and legitimate compensation methodology approaches. CMS also provides clarification of its existing position with respect to the Isolated Transactions exception.

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