In the 2016 Medicare Physician Fee Schedule (PFS), the Centers for Medicare & Medicaid Services (CMS) made several important and provider-friendly revisions and additions to the physician self-referral law (Stark Law). The PFS created two new Stark exceptions—one for the recruitment of non-physician practitioners (NPPs) and one for timeshare arrangements. The PFS also made several clarifications and additional revisions to the Stark Law regulations.

NPP Recruitment Exception

The NPP recruitment exception allows hospitals, federally qualified health centers and rural health clinics to pay physicians to help them employ NPPs (includes only physician assistants, nurse practitioners, clinical nurse specialists, certified nurse midwives, clinical social workers, and clinical psychologists). The financial assistance provided to physicians is limited to 50 percent of the NPP’s actual compensation over the first two years of the arrangement. The NPP must have a compensation arrangement (for example, employment arrangement) with the physician or the physician’s practice, and substantially all of the services provided must be primary care or mental health services.

Timeshare Exception

The timeshare exception addresses arrangements for the use of office space, equipment, personnel, supplies, and other services between a physician or the physician’s organization and either a hospital or a physician organization of which the physician is not an owner, employee, or contractor. The items and services must be used predominantly for evaluation and management (E/M) services, and any equipment must be located in the building where the E/M services are provided and cannot be used to furnish designated health services (DHS) unless the DHS is incidental to the E/M services. Although compensation under the arrangement must be set in advance and cannot be determined based on referrals, rental fee formulas may be time-based or based on a flat fee. CMS made clear that rental fees may not be based on a percentage of revenue attributable to a party’s use of the timeshare or on a per unit of service basis, as those fee structures present a risk of overutilization and patient steering.

Additional CMS Clarifications

CMS also clarified that for Stark exceptions requiring an arrangement to be set out in writing or in a written agreement, there is no requirement for a particular type of writing or even a singular document. Instead, depending on the facts of a particular circumstance, a collection of contemporaneous documents may suffice. The PFS amends the holdover provisions in the office space rental, equipment rental, and personal services exceptions to allow arrangements that have expired to continue indefinitely if certain safeguards are met, including that the compensation continues to be fair market value.