COMPLIANCE GUIDANCE

Stark Law: CMS Plan Would Make It Easier for Labs to Get Advisory Opinions

In late July, CMS proposed to update the advisory opinion process that labs and other providers use to get a determination about whether a proposed business arrangement would violate the Stark Law. Here are the key things you need to know.

The Current Advisory Opinion Process

The first thing you need to understand is that the CMS Stark Law advisory opinion is modeled on the process used by the OIG to issue advisory opinions under the Anti-Kickback Statute (AKS). While both laws are designed to prevent conflict of interest and payment for referrals, the AKS model isn’t well suited to Stark. For one thing, the AKS is a criminal statute while the Stark Law is a strict liability civil payment statute. And unlike the AKS, qualifying for an exception is mandatory to avoid liability under Stark. That makes the need for Stark guidance through the advisory opinion process more important than it is for the AKS. In spite of that, CMS has issued only 30 advisory opinions since the advisory opinion regulations were adopted in 1998. Adding to the problem is that only the requestor, i.e., the provider that asks for the Stark Law advisory opinion, is allowed to rely on it. In other words, the opinion doesn’t apply to the other non-requesting parties to the arrangement.  

The 5 Proposed Changes

The need to fix the advisory opinion process came to light in July 2018 when CMS issued a Request for Information (RFI) on adapting the Stark Law to value-based care. See Lab Industry Report (LIR), July 16, 2018. Even though it wasn’t one of the issues listed in the RFI, the advisory opinion process was the subject of many of the comments. So, CMS decided to tinker by proposing five changes to the Stark Law advisory opinion process.

1. Broaden Scope of Issues Advisory Opinion Can Cover

Current rules limit the types of advisory opinions that CMS will provide and the issues it will cover. Now the agency wants to loosen those restrictions so it can issue advisory opinions on a wider range of Stark issues, e.g., any conduct that’s the subject of a current government investigation or other proceeding.

2. Shorten Timeline for Issuing Advisory Opinions

CMS proposes to shorten the deadline for issuing advisory opinions from 90 to 60 days, which would begin on the date that CMS formally accepts a request for an advisory opinion and toll while a request is revised and/or CMS awaits information from the requestor. CMS is also considering providing an option to request an expedited 30-day review.

3. Ease Certification Requirements

CMS proposes to lift limitations on who can sign a requestor’s advisory opinion certification to allow for signing by any officer that’s authorized to act on behalf of a requestor. Alternatively, CMS is considering whether to eliminate the certification requirement altogether since it may be unnecessary in light of federal laws that criminalize the submission of material false statements to a federal agency.

4. Revise Fee Structure for Processing Advisory Opinions

To cover costs, 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—$440 per hour for an expedited opinion. CMS is also considering whether to eliminate the initial fee and whether to establish a cap on fees.

5. Let Third Parties Rely on Advisory Opinions

Under the CMS proposal, a favorable advisory opinion, i.e., one finding an arrangement not to raise Stark Law concerns, would preclude penalties against not only the parties requesting the opinion, but also any other 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. Last but not least, CMS wants to expressly recognize that other third party individuals and entities may reasonably rely on an advisory opinion as non-binding guidance.

Takeaway: While the proposed improvements are welcome news for labs, the cloud in the silver lining was the agency’s refusal to do what so many in the industry want the most, namely, accept advisory opinion requests based on hypothetical fact patterns. While it would optimize the value of guidance in navigating the uncertainties of Stark, CMS fears that issuing advisory opinions based on hypotheticals would lead to an overwhelming flow of requests. But the agency did at least leave the door open to hypothetical advisory opinions in the future.

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