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Winter 2016
IN THIS ISSUE
d&G Lawyer News
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Stark Waiving Mad: New Waivers Promulgated by CMS and OIG Provide Protection Against the Stark Law’s Referral Prohibitions
By: Don Greiwe
Accountable Care Organizations (ACOs) are groups of doctors, hospitals, and other health care providers, who come together voluntarily to give coordinated high quality care to their Medicare patients. The goal of coordinated care is to ensure that patients, especially the chronically ill, get the right care at the right time, while avoiding unnecessary duplication of services and preventing medical errors. In addition to sharing patient health information seamlessly, ACO members share financial risk as well. Accountable Care Organizations have been a part of the national health care landscape for over five years, as they came into being as a result of the passage of the Patient Protection and Affordable Care Act (PPACA). During these five years, the number of ACOs in the United States has grown steadily. The Centers for Medicare and Medicaid Services identified, as of February 05, 2016, 46 ACOs that provide services in the State of Florida.
Because the ACOs are not meant to be organized and governed in the way that group practices, managed care plans, and other conventional health care practices have been traditionally, the members of ACOs and their advocates realized that certain necessary operations within an ACO would violate certain longstanding health laws - particularly the Stark Law.
42 U.S.C. § 1395nn, more commonly known as the Stark Law, prohibits physicians from making patient referrals to an entity with which the physician has a financial relationship i, if the services provided by the entity are of a particular nature and may be paid by Medicare.ii In essence, the Stark Law prohibits physicians from profiting financially from referring patients to other health care practices for services to be paid by Medicare. Certain exceptions, outlined in the Stark Law may apply, however, including, but not limited to referrals to physicians within the same “group practice” as the referring physician.iii
Because an ACO operates under a single economic entity, usually an LLC, each physician has at least an indirect financial relationship under the Stark Law with the other members of the ACO. Furthermore, the Stark Law’s somewhat traditional definition of a “group practice” in the group practice exception mentioned above does not typically include the standard organizational structure of an ACO. Therefore, for example, if a primary care physician in an ACO referred his patient to a fellow ACO member oncologist, the referral would be in violation of the Stark Law.
Acknowledging that application of the Stark Law against ACOs would undermine their stated goal and purpose, the Centers for Medicare and Medicaid Services (CMS) and the Office of the Inspector General (OIG) issued several “Fraud and Abuse Waivers” in an interim final rule that became final, with several changes, on October 29, 2015. iv The Final Rule sets into stone five waivers that affect, among other things, the applicability of the Stark Law to referrals made between physicians in the same ACO: (1) ACO Pre-Participation Waiver); (2) ACO Participation Waiver); (3) Shared Servicing Distribution Waiver; (4) Patient Incentive Waiver; and (5) Compliance with Physician Self-Referral Law Waiver. v
The waivers protect Medicare Shared Savings Program (MSSP) ACOs and their members with broad protection against specified fraud and abuse laws, including the Stark Law, if all the conditions to the waivers are met. In addition, the ACO Pre-Participations waiver allows start-up ACOs to avoid Stark Law penalties before they actually participate in the MSSP.vi
For the time being, ACOs and the benefits they propose to provide to their patients and physician participants will be protected from the debilitating restrictions placed on physician referrals by the Stark Law. By finalizing these waivers, CMS and OIG acknowledge that in order for ACOs to provide the innovative financial and treatment efficiencies they are intended to promote, relief from traditional health care laws, including the Stark Law, is necessary. For answers to questions regarding Accountable Care Organizations, the Stark Law, or the Fraud and Abuse Waivers established by CMS and OIG, please contact Don Greiwe in our office at dgreiwe@dgfirm.com.
iThe Stark Law defines a financial relationship as follows:
For purposes of this section, a financial relationship of a physician (or an immediate family member of such physician) with an entity specified in this paragraph is—
(A) except as provided in subsections (c) and (d) of this section, an ownership or investment interest in the entity, or
(B) except as provided in subsection (e) of this section, a compensation arrangement (as defined in subsection (h)(1) of this section) between the physician (or an immediate family member of such physician) and the entity.
An ownership or investment interest described in subparagraph (A) may be through equity, debt, or other means and includes an interest in an entity that holds an ownership or investment interest in any entity providing the designated health service.
42 U.S.C. § 1395nn(a)(2)
ii42 U.S.C. § 1395nn(a).
iii42 U.S.C. § 1395(nn)(b)(1).
iv Centers for Medicare and Medicaid Services (CMS) and Office of Inspector General (OIG); Medicare Program; Final Waivers in Connection With the Shared Savings Program; Final Rule, 80 F.R. 66,725 (Oct. 29, 2015).
v Id.
vi Id.
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