[co-author: Micaela Enger]
The Centers for Medicare & Medicaid Services (CMS) recently released data on its 2021 and 2022 settlements of voluntary self-disclosures related to past violations or potential violations of the physician self-referral law (the “Stark Law”). In 2022, CMS settled a record 104 self-disclosures, with settlement amounts totaling over $9,000,000 in the aggregate. These amounts are nearly quadruple the number and amounts of settlements in 2021 and one more than the previous record number from 2016. The record number and value of settlements in 2022 shows a marked increase from 2020 and 2021, when we speculated that CMS focused greater attention on the 2019 novel coronavirus (“COVID-19”) pandemic. Coming on the heels of the COVID-19 pandemic, it appears that CMS is working to review a greater number of self-disclosure submissions annually, which may reduce the backlog or the time it takes to have a self-disclosure reviewed.
The settlements announced by CMS are part of a process to address technical, and often inadvertent, violations of the Stark Law. CMS established the voluntary self-referral disclosure protocol (SRDP) after Congress required such process in the Affordable Care Act (ACA) to allow providers and suppliers to self-disclose actual or potential violations of the strict liability Stark Law, which prohibits a physician from referring designated health services (e.g., hospital services, clinical laboratory, radiology or other imaging, or DMEPOS) to an entity, including his or her medical practice, where he, she or his/her family have a compensation or ownership relationship, unless the referral and/or the relationship is protected by meeting each element of an enumerated Stark Law exception. The SRDP’s primary benefit has been CMS settling disclosed conduct for a fraction of the theoretical liability exposure stemming from such conduct.
It often takes several years to reach a settlement once a self-disclosure is submitted, so the uptick in settlements signals a concerted effort by CMS to work through the backlog of self-disclosures that have been submitted in prior years. The chart below shows the number of settlements made each year to date.
While CMS appears to have increased its pace in processing and settling self-disclosures, it is unclear if the number of SRDP submissions continues to outpace the number of settlements given the vast number of financial arrangements that implicate the Stark Law. Previously, when finalizing revisions to the Stark Law in November 2020, CMS noted in the commentary that it received over 1,200 voluntary filings since the SRDP was promulgated. Based on the current total number of settlements, withdrawals, and closed filings, CMS has just passed the halfway mark of the number of submitted disclosures reported back in 2020. Since then, we know additional submissions have been made, such that well over half the submissions over the last 12 years are still pending. It is unclear how CMS will address this ongoing backlog more broadly, though CMS made updates to its SRDP earlier this year to streamline submissions and reduce burdens on self-disclosing providers and could make further changes to its process going forward.
In addition to the total number of settlements , the CMS’ recovered amounts under 2022 settlements hit a record high of over $9.2 million. A high aggregate settlement amount is not necessarily surprising given the record number of settlements made. However, the average settlement amount continues to vary without any specific trends as set forth below.
Generally, the average amount for individual settlements in 2022 ($89,306.40) appears to remain on the lower end of the average compared to prior years, though it was still higher than the average amounts in recent years such as 2019 and 2021. We continue to observe whether there is a trend in lower settlement amounts. However, a number of factors may contribute to the exact numeric value of a specific settlement. Given the relatively low number of settlements in each year, one or two outliers with very high or low settlement values could skew the aggregate settlement amount. CMS made clear that the numbers in settlements are very fact-dependent, which it does not publicly disclose from submissions. We would be interested to see additional data on the settlement values and the underlying conduct settled to understand the types of settlements made and any trends associated with settlement values.
We do note that CMS also provides the highest and lowest settlement each year and the 2021 and 2022 reported numbers do not change the past individual record amounts. In 2021and 2022, the highest settlement amounts were $1,110,148 and $1,171,174 respectively. However, the highest individual settlement amount remains $1,196,188 in 2018 and the lowest individual settlement amount was $33 in 2020.
Overall, CMS’ recent update of settlements involving SRDP voluntary submissions confirm our anecdotal experiences that CMS has increased its settlement activities after the COVID-19 pandemic. For providers that previously waited for years for self-disclosed conduct to settle, the 2022 record year is likely good news and may suggest future time periods may not be as long.