Presenting a live 90-minute webinar with interactive Q&A Structuring Physician Timeshare Arrangements: Leveraging the New Stark Exception, Navigating the Limitations THURSDAY, APRIL 28, 2016 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Patricia (Pia) Dean, Partner, Holland & Hart , Denver Kim C. Stanger, Partner, Holland & Hart , Boise, Idaho Rick L. Hindmand, Member, McDonald Hopkins , Chicago The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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THE STARK LAW: THE NEW EXCEPTION FOR TIMESHARE ARRANGEMENTS Rick Hindmand, Kim Stanger, and Pia Dean
Agenda Stark Law background Timeshare exception – requirements Structuring the timeshare arrangement Practical challenges 6
The Stark Law The Federal Ethics in Patient Referrals Act ("Stark Law") generally prohibits physicians from referring patients for designated health services (" DHS”) payable by Medicare with which the physician has a financial relationship unless the arrangement meets each of the requirements of a regulatory exception. 42 USC 1395nn; 42 CFR 411.353 7
Stark Analysis Is there a referral from a Is the service provided to a 1. physician for a DHS? If patient covered by Medicare so, does the physician (or an immediate family (or Medicaid)? member) have a financial Is the service provided to the relationship with the 2. entity providing the patient a DHS? DHS.? If so, does the financial relationship Pursuant to a "referral"? 3. satisfy the requirements From a "physician"? of an exception? 4. With whom the entity has a 5. "financial relationship"? 8
Stark Exceptions If a financial relationship exists between a Even though the penalties for violating physician and an entity furnishing DHS, then no the Stark Law are referrals for DHS may be made by the physician civil, rather than criminal, because the to the entity unless the relationship meets all of entity must refund any the requirements of a specific exception. payment collected for the services and may be assessed The Stark Law recognizes a number of common, additional civil legitimate financial arrangements between monetary penalties, (and potential liability physicians and entities, including their group under the False Claims practices, hospitals, and other services. Act) the amount of money associated with a Stark Law violation can be substantial. 9
Rental of Office Space Exception One of the commonly utilized Stark exceptions allows for physicians and medical groups to lease or rent office space to or from other medical groups, physicians, and facilities to which they refer patients. A similar exception applies to equipment leases. These exceptions have the following requirements: there is a written rental or lease agreement, signed 1. by the parties; 10
Rental of Office Space Exception the agreement describes the specific premises or equipment 2. rented or leased; The term of their agreement is at least one year in duration, 3. and if the agreement is terminated during the term (with or without cause), the parties are restricted from entering into a new agreement during the first year of the original term of the agreement; The space or equipment rented or leased does not exceed that 4. which is reasonable and necessary for the legitimate business purposes of the lease or rental arrangement; The space or equipment is used exclusively by the lessee when 5. being used by the lessee (and is not shared with or used by the lessor or any person or entity related to the lessor); 11
Rental of Office Space Exception with respect to the rental of office space, the tenant may 6. make payments for common area maintenance fees or charges only if the payments do not exceed the tenant’s pro rata share of expenses for the space based upon the ratio of the space used exclusively by the tenant to the total amount of space occupied by all persons using the common areas; the rental charges over the term of the agreement are set 7. in advance and are consistent with fair market value; the rental charges are not determined in a manner that 8. takes into account the volume or value of any referrals or other business generated between the parties; and the agreement would be commercially reasonable even if 9. no referrals were made between the parties. 12
Limitations of the Office Space/Equipment Exception Several requirements of the Rental of Office Space and Equipment exceptions significantly limit their flexibility: there must be a formal lease that provides for exclusive use by the lessee; the lessor and lessee are generally not permitted to share space or equipment during the lease term; and the lease cannot be on an “as needed” basis. 13
CMS Expansion of Exceptions Through the administration of the Stark Physician Self-Referral Disclosure Protocol ("SRDP"), CMS began to recognize the burdensome nature of these provisions and the importance of timeshare arrangements in situations where a full-time lease is not necessary or practical, especially in rural and underserved areas. In July 2015, CMS published a proposed rule pertaining to payment policies under the Physician Fee Schedule for CY 2016. CMS issued a finalized rule (with certain modifications) in November 2015. 14
Finalized Timeshare Exception Effective January 1, 2016, a new Stark exception "We believe that permits physicians and hospitals or other physician timeshare groups to share space, equipment, personnel, arrangements that permit the items, supplies or services through non-exclusive use of office time-share arrangements provided certain space, equipment, conditions are met. 42 CFR 411.357(y). personnel, items, supplies, or CMS’s response to comments and explanation of services can be the new Stark exceptions can be found at Federal structured in a Register, Vol. 80, No. 220, 71300-379, with way that does not pose a risk timeshare commentary at pages 71325-33. of program or patient abuse." 80 Fed. Reg. 71326. 15
Requirements of the Timeshare Exception The new timeshare exception requires the following conditions: The arrangement is set out in writing, signed by the parties, and 1. specifies the premises, equipment, personnel, items, supplies, and services covered by the arrangement; The arrangement is between a physician [or the physician's 2. group in whose shoes the physician stands] and (i) a hospital; or (ii) a physician organization of which the visiting physician is not an owner, employee, or contractor. The exception applies only to physicians, physician • organizations and hospitals. The exception does not protect timeshare arrangements with • other DHS entities, such as laboratories or independent diagnostic testing facilities. 80 Fed. Reg. 71329. 16
Requirements of the Timeshare Exception The premises, equipment, personnel, items, supplies, and 3. services covered by the arrangement are used predominantly for the provision of evaluation and management ("E/M") services to patients; and (ii) on the same schedule. The purpose of the new provision is to increase access to care, not to facilitate the physician's ability to provide DHS in supplemental medical practice sites. According to CMS, “the use of office space by the physician solely or primarily to furnish DHS to patients (as opposed to E/M services) would not be protected by the new exception.” 80 Fed. Reg. 71330 . 17
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