Key Takeaways from CMS' New Proposed Rule on Stark Law Advisory Opinions

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While the industry awaits more sweeping value-based related changes to the Stark Law regulations, on July 29, 2019, the Centers for Medicare & Medicaid Services (CMS) took a small step toward updating its Stark Law advisory opinion process in the proposed Medicare physician fee schedule update for Fiscal Year 2020. The proposed rule responds to comments received by CMS in response to its Request for Information (RFI) published on July 25, 2018. The RFI, which was issued as part of the U.S. Department of Health & Human Services’ (HHS) “Regulatory Sprint to Coordinated Care,” requested suggestions on how CMS can address the challenges that providers face in complying with the Stark Law, particularly as the healthcare landscape continues to transition to value-based care. Although the RFI relates primarily to barriers that affect how providers can structure financial relationships, CMS’ newly proposed rule responds only to comments regarding the Stark Law advisory opinion process. Although notable, it seems unlikely that these changes will significantly increase the use of the CMS advisory opinion process or, as the industry hopes, be the avenue through which the industry obtains the ever-elusive Stark Law clarity it seeks.

CMS’ proposals recognize that the Office of Inspector General’s (OIG) Anti-Kickback Statute (AKS) advisory opinion rules (upon which CMS modeled many of its Stark Law advisory opinion regulations) are unsuitable in the context of the Stark Law; because the Stark Law is a complex, strict liability statute, parties require additional certainty that their proposed financial arrangements comply with Stark Law requirements. However, despite the Stark Law’s complexity and providers’ increased financial exposure in this area, CMS has effectively issued only 30 advisory opinions since the advisory opinion regulations were first promulgated in 1998. In an effort to finally make the advisory opinion process more accessible and efficient, CMS has therefore proposed to do the following:

Broaden the scope of advisory opinion issues

CMS proposes to ease certain restrictions regarding the types of advisory opinion requests that it may accept and the advisory opinions it may issue. Currently, CMS will not issue an advisory opinion if the request involves conduct that is also the subject of an investigation or other government proceeding. To address this, CMS proposes to instead maintain discretion to determine, in consultation with OIG and the Department of Justice, whether it would be appropriate to accept a request or issue an advisory opinion in such cases. CMS also proposes to give itself additional flexibility to reject an advisory opinion request or not issue an advisory opinion if the request does not describe the arrangement at issue with sufficient detail for CMS to issue an opinion, or the requestor does not timely respond to CMS’ requests for additional information.

CMS currently does not accept hypothetical fact patterns or general questions of interpretation, but it will consider requests for opinions that involve existing arrangements and arrangements into which the requestor plans to enter. Despite comments requesting that CMS expand the advisory opinion process to address hypotheticals and general questions of interpretation, CMS declined to do so out of concern that the agency would be overwhelmed with requests. However, CMS is seeking comments regarding whether it should do so in the future and highlighted resources available at its CMS Physician Self-Referral Call Center as well as its responses to frequently asked questions.

Shorten the timeline for issuing advisory opinions to 60 days

CMS proposes to shorten the 90-day deadline for issuing advisory opinions to 60 days. The 60-day period would begin on the date that CMS formally accepts a request for an advisory opinion and would be tolled while a request is revised or while CMS awaits information from the requestor. CMS is also considering whether to provide requestors with the option to request an expedited 30-day review. CMS seeks comment on the parameters for expedited review.

Ease certification requirements

CMS proposes to lift certain limitations regarding who must sign a requestor’s advisory opinion certification. For example, CMS currently requires that if the requestor is a corporation, then the chief executive officer or a comparable officer must sign the request. However, CMS’ proposal would instead permit any officer that is authorized to act on behalf of a requestor entity to sign the advisory opinion certification.

Alternatively, CMS is considering whether it should eliminate the certification requirement. Under existing regulations, a requestor must certify that, to the best of the requestor’s knowledge, all of the information provided with the request is true, correct and complete. If the request relates to a proposed arrangement, then the requestor must also certify its good faith intent to enter into the arrangement described in its request. CMS believes that these requirements may be unnecessary in light of federal laws that criminalize the submission of material false statements to a federal agency.

Revise the fee structure

To cover the costs of responding to advisory opinion requests, CMS charges requestors an initial fee of $250 and holds requestors responsible for any costs incurred in excess of the initial $250 payment. CMS is proposing to adopt an hourly fee of $220 for preparation of an advisory opinion. CMS is considering whether to eliminate the initial fee and whether to establish a cap on fees. CMS is also considering charging $440 per hour to process requests for expedited advisory opinions.

Permit third-parties to rely on advisory opinions

CMS is also considering whether to remove limitations on the universe of individuals and entities that can rely on advisory opinions. Consistent with OIG policies in the AKS context, CMS has long taken the view that a Stark Law advisory opinion may be relied upon only by the requestor. CMS is proposing that a favorable advisory opinion would preclude sanctions not only for the parties requesting the opinion, but also for any individuals or entities that are parties to the specific arrangement for which the advisory opinion was issued. CMS also proposes not to pursue sanctions against parties to an arrangement that CMS determines to be “indistinguishable in all material aspects” from an arrangement that was the subject of a favorable advisory opinion. Additionally, CMS proposes changes to generally recognize that individuals and entities may reasonably rely on an advisory opinion as non-binding guidance.

Other modifications

CMS is also soliciting comments on whether it should change the circumstances in which it may rescind an advisory opinion. Specifically, CMS is considering whether it should rescind an advisory opinion only when (1) there is a material regulatory change that impacts the conclusions reached, or (2) a party has received a negative advisory opinion and wishes to have the agency reconsider its request in light of legal or factual developments.

CMS requests comments on these and other proposed changes to its Stark Law advisory opinion process. Entities interested in obtaining assistance with preparing comments to the Proposed Rule by the September 27, 2019, deadline may contact attorneys in our Healthcare Practice Group.

Finally, as noted, these developments reflect only the first steps taken by HHS to respond to RFI comments. Providers should, therefore, continue to monitor CMS and OIG actions related to their “Regulatory Sprint to Coordinated Care.”

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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