CMS has recently confirmed, through Self-Referral Disclosure Protocol submissions, that the “Payments by a Physician” exception under the Stark law may apply more broadly than many physicians have believed, according to a May 2 blog post from the law firm Hall, Render, Killian, Heath & Lyman.
Here are seven things to know:
1. One exception to the Stark law allows physicians to pay fair market value for services or items, such as renting equipment or office space, without triggering a referral violation. This is known as the “Payments by a Physician” exception. Historically, many healthcare providers believed this exception could only be used when no other Stark law exceptions applied. As a result, they avoided using it even in eligible situations, limiting its practical utility.
2. In 2007 and again in 2015, CMS seemed to reinforce this narrow interpretation by stating that the exception could not be used for arrangements like office timeshares, according to the post.
3. However, in 2020, CMS reversed course, stating the exception can be used even if other Stark law exceptions apply, as long as the payment meets fair market value criteria. A 2007 typo — substituting the word “excepted” with “addressed” — was cited as a source of earlier confusion. CMS later clarified this was an error and not intended to limit the rule.
4. CMS now explicitly allows providers to rely on the Payments by a Physician exception in more scenarios than previously assumed, even when other regulatory exceptions exist. This exception is attractive because it’s easier to meet than many others, according to the post. It does not require a written contract, a specific duration or proof of commercial reasonableness.
5. In 2016, CMS introduced a separate “Timeshare Exception” to address arrangements where physicians use office space without leasing or controlling it. This was meant to distinguish timeshares from traditional leases. To determine which rule applies, a provider must first assess whether the arrangement qualifies under the strict exception. If it doesn’t, such as when there is no written agreement, the Payments by a Physician exception may serve as a fallback, provided the physician is paying fair market value.
6. The Payments by a Physician exception cannot be used for office space rentals, which are governed by other Stark law provisions. It also applies only when the physician is the one making the payment, not when receiving compensation.
7. CMS has confirmed that this exception is more flexible than previously believed, but it still requires careful, case-specific evaluation to ensure compliance.
Read the full analysis here.
The post Why physicians may have misunderstood this Stark law rule for years appeared first on Becker’s ASC.
