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New Stark and Incident to Rules

A version of this article was published in The Daily Record on September 13, 2016.

On November 16, 2015, the Centers for Medicare and Medicaid Services (CMS) published the final 2015 Physician Fee Schedule (Final Rule). Interestingly, the Final Rule also includes new exceptions and interpretations of the federal physician self-referral law (Stark Law) and clarifications to Medicare "incident to" billing rules.

A. The Stark Law

The Stark Law prohibits physicians from referring Medicare patients for certain designated health services (DHS) to an entity with which the physician or a member of the physician's immediate family has a financial interest. There are, however, exceptions, two of which are newly created by the Final Rule.

B. Non-Physician Recruitment

Hospitals, federally qualified health centers (FQHC), and rural health clinics (RHC) are now permitted to provide financial assistance to a physician or group for the recruitment of a non-physician practitioner (NPP), which is defined as a physician assistant, a nurse practitioner, a clinical nurse specialist, a certified nurse midwife, a clinical social worker, or a clinical psychologist.

The exception permits financial assistance for physicians or groups either employing or directly contracting with an NPP on an individual basis, thereby excluding recruiters and staffing agencies. The arrangement must be set out in writing and must not be conditioned on the physician's or NPP's referrals to the hospital, FQHC, or RHC.

Furthermore, the exception has a requirement that "substantially all" (at least 75%) of the NPP's services are primary care and/or mental health care services, and the NPP cannot have practiced or otherwise provided services in the same geographic area as the supporting institution in the year prior to the commencement of the compensation arrangement.

Financial assistance is only available for the first two years of the NPP's engagement, and the physician or group can only claim this new exception once every three years. Remuneration must not be more than 50 percent of the NPP's actual salary, signing bonus, and benefits, cannot take the volume or value of referrals into account or exceed fair market value.

C. Timeshare Exception

A new timeshare exception enables a physician (Licensee) to enter into an arrangement to use premises, equipment, personnel, items, supplies or services of another health care provider (Licensor) on a limited or as-needed basis. Unlike the existing space and equipment lease exceptions, the timeshare exception does not have a term requirement, nor does it have exclusive use and control requirements.

The timeshare exception must be set out in writing and must specify the premises, equipment, personnel, items, supplies, and services covered by the arrangement. It cannot be conditioned on the referral of patients, and compensation must be set in advance, be consistent with fair market value, and not take the volume or value of referrals into account.

Finally, the premises, equipment, personnel, items, supplies, and services covered by the arrangement must be used predominantly by the Licensee to provide evaluation and management (E/M) services, and the Licensor's equipment covered by the arrangement must be located in the same building where the E/M services are furnished, and not used by the Licensee to furnish DHS other than those incidental to the E/M services furnished at the time of the patient's E/M visit.

D. Relaxing Contract Formality

In addition to adding a non-physician recruitment exception and a timeshare exception, the Final Rule makes some other notable modifications and clarifications to the Stark Law.

When the Stark Law requires certain physician agreements to be signed and in writing, these requirements may be satisfied by a collection of contemporaneous documents evidencing the arrangement. No single, formal contract is required.

Similarly, when the Stark Law requires certain physician agreements to have a term of at least one year, the contract itself need not specify the length of the term so long as the arrangement does actually continue for at least one year.

Moreover, the Stark Law no longer requires certain lease arrangements to end or be formally renewed within six months after the formal expiration of the lease. A lease may now "holdover" indefinitely, so long as certain safeguards are met.

E. "Incident to" Billing Rules

In addition to Stark Law changes, the Final Rule clarifies certain Medicare "incident to" billing rules. "Incident to" services are those that are furnished as an integral, although incidental, part of the physician's or other practitioner's personal professional services in the course of diagnosis or treatment of an injury or illness. Entities may bill a service as a physician service even if the service is not performed by a physician, so long as the service is performed "incident to."

"Incident to" services require direct supervision of the auxiliary personnel, those performing the service but not actually billing for it, by the physician or practitioner. The only exceptions are care management and transitional care management services, which require general supervision only. ("Direct" supervision means that the supervisor must be physically on-site at the time the service is performed, while "general" supervisor means the supervisor must be available on-site or off-site for consultation as needed.)

The Final Rule provides that the physician or other practitioner supervising the auxiliary personnel need not be the same physician or other practitioner upon whose professional service the "incident to" service is based, such as the physician or other practitioner who orders or refers the beneficiary for the services, or initiates treatment. However, the physician or other practitioner who actually bills for the "incident to" service must be the same physician or other practitioner who directly supervises the service.


March 23, 2016




Rosen, Barry F.


Health Care