Final Rule Issued: Stark Law Modifications Designed to Ease the Burden of Compliance

November 19, 2015 | By Lawrence J. Tabas

On October 30, 2015, the Centers for Medicare and Medicaid (“CMS”) issued a final regulation that includes modifications to the Stark Law (the “Final Rule”). Among other things, the Final Rule adds two new exceptions to the Stark Law’s prohibited referrals and clarifies regulatory definitions and requirements. These new regulations were published in the Federal Register on November 16, 2015. The majority of these changes will go into effect on January 1, 2016.

The Stark Law prohibits physicians from making referrals for designated health care services to an entity in which they or an immediate family member have a financial interest, unless an exception applies.

The Stark Law is generally regarded as one of the most complex and technical requirements for health care providers. Because of its complicated nature, many health care providers fear violating a provision of the Stark Law, despite their best efforts to ensure compliance. The penalties for violating the Stark Law can be severe. They include the denial of payment by Medicare or Medicaid for a designated health service, the refund of any payment received for a prohibited referral, the imposition of a $15,000 per service penalty, and the imposition of a fine up to $100,000 for arrangements in which physician or entities enter into agreements that have the principal purpose of ensuring referrals to an entity in violation of the law. Additionally, a health care provider who violates Stark could be excluded from participating in Medicare and Medicaid programs.

The Final Rule is meant to lessen the burden on health care providers by clarifying certain aspects of the Stark Law and allowing for new exceptions to the prohibition on self-referrals. We highlight some of the changes included in the Final Rule below. Please note that this is not intended to be a comprehensive summary, but rather a summary of selected changes and clarifications.

The Final Rule clarifies or explains the following:

  • The Stark Law definition of “remuneration” excludes items, devices, or supplies used solely to collect, transport, process, or store specimens for the entity furnishing the items, devices, or supplies, or ordering or communicating the results of tests or procedures of such an entity. The Final Rule clarifies that the items may be used for one or more of these purposes, but cannot be used for a purpose that is not included in the statute.
  • Many Stark Law compensation exceptions require a written agreement to set forth the terms of the arrangement. The Final Rule clarifies that there is no need for a single formal contract. Instead, a collection of documents may satisfy the writing requirement if they demonstrate the terms of the arrangement, are contemporaneous, and meet the signature requirement. Notably, the term “arrangement” was substituted for “agreement” or “contract” in several Stark exceptions in order to clarify this point. For situations in which there is temporary non-compliance with signature requirements, entities have up to 90 days to obtain all required signatures, regardless of whether the late signature is advertent or inadvertent.
  • A contract or other arrangement for the rental of office space, rental of equipment, or personnel service arrangement does not have to provide an explicit term provision. Instead, the arrangement need only last a year, as a matter of fact.
  • Ownership or investment interests in securities listed for trading on an electronic stock market or an over-the-counter quotation market are permitted as long as quotations are published on a daily basis and trades are standardized and publicly transparent.
  • Indefinite holdovers or holdovers for a definite period of time that is greater than six months are permitted as long as they continue under the same terms and conditions as the immediately preceding arrangement and additional safeguards are met.
  • Under the physician recruitment exception, the geographic area served by a federally qualified health center (“FQHC”) or a rural health center (“RHC”) is the lowest number of contiguous or noncontiguous zip codes comprising 90 percent of patients as determined on an encounter basis.

In addition, the Final Rule to the Stark Law adds the following exceptions:

  • The Final Rule permit hospitals, FQHCs and RHCs to make payments to physicians in order to recruit and employ non-physicians practitioners (“NPPs”) who provide substantially all primary care services or mental health services. The definition of an NPP is expanded to include clinical social workers, clinical psychologist, physician assistants, nurse practitioners, clinical nurse specialists, and certified nurse midwives. However, assistance is limited to no more than fifty percent of the aggregate compensation provided to the NPP. In addition, FQHCs and RHCs may not provide assistance to the same physician more than once every three years.
  • In addition, as long as certain criteria are met, the Final Rule permits timeshare arrangements for the use of a premise, equipment, personnel, items, supplies, or services under certain circumstances when the hospital or physician organization is the “licensor.”

The Health Law Gurus™ will continue to monitor the implementation of the final regulations to the Stark Law. Please check back with us for more updates.

Note that this post is only intended to be a brief summary of the modifications to the Stark law and is not intended to be legal advice. For advice specific to individual circumstances, you should consult with an experienced health law attorney.

Categorized In: Regulations, Stark Law

About the Authors

Lawrence J. Tabas


Lawrence is the Chair for Obermayer’s Health Care Law Department and Election Law Practice Group. Lawrence’s Health Care Law legal experience includes the representation of Pennsylvania County governments in Behavioral Health Managed...

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