CMS Proposes Welcome Changes to Stark Law Advisory Opinion Process

August 26, 2019

The Centers for Medicare & Medicaid Services (CMS) recently issued its annual Physician Fee Schedule and Quality Payment Program Proposed Rule for calendar year 2020. Among other things, it addresses potential changes to Section 1877 of the Social Security Act (commonly known as the Stark Law) physician self-referral advisory opinion process.

Under the current rules, CMS has issued only 15 advisory opinions unrelated to a specific physician-owned hospital topic in 20 years. In releasing the proposed rule, CMS explained that it intends to simplify the process for requesting advisory opinions and will provide the public with meaningful advice regarding whether a specific arrangement violates the Stark Law, signaling a willingness from CMS to increase use of the process.

Comments on the CMS proposal and requests for information are due Sept. 27, 2019. If finalized, these changes to the advisory opinion process would be effective on Jan. 1, 2020. Read on for five key takeaways regarding the proposed changes, which the healthcare community may welcome if the process is used more often to navigate the complex, strict liability statute.

1. Procedural Changes to the Process for Requesting an Advisory Opinion

If implemented, the proposed rule would modify procedures for requesting an advisory opinion from CMS on a Stark Law issue. In an effort to ease restrictions on the issuance of advisory opinions — which currently prohibit CMS from issuing an opinion on the same, or substantially the same, course of action that is under investigation or has been subject to a proceeding involving a governmental entity, such as the Department of Health & Human Services (HHS) — the proposed rule would allow CMS to consult with the HHS Office of Inspector General and Department of Justice to exercise discretion as to whether issuance of the advisory opinion is appropriate. Additionally, CMS is considering easing a strict requirement that questions be based on existing arrangements or arrangements that the requestor has actual plans to enter into. Notably, CMS indicates in the proposed rule that to consider a request, it must describe the arrangement at issue in sufficient detail, otherwise CMS will refrain from issuing the opinion until further information is provided or, in the alternative, may reject the request.

Although CMS is not currently proposing to expand the process to include hypothetical fact patterns, it is soliciting comments on whether it should do so in the future. Furthermore, CMS proposes to modify the certification requirement to clarify that the certification must be signed by an officer authorized to act on behalf of the requestor, though CMS is also considering removing the certification requirement altogether. Finally, CMS proposes to eliminate the reference to the provision of stock certificates as part of the advisory opinion request submission, as these are typically electronic and may not necessarily list the name of the owner. The vast majority of the proposed procedural changes appear to be in an effort to ease the current burdens that requestors face and the restrictions that currently limit CMS in issuing opinions.

2. Shortened Timeline for Issuing Advisory Opinions

Currently, CMS operates on a 90-day timeframe for most advisory opinion requests, though it does reserve the right to extend beyond the 90-day window in cases that involve complex legal issues or highly complicated fact patterns. Under the proposed rule, CMS would shorten its response time to 60 days, which would begin on the date that CMS formally accepts a request for an advisory opinion. The 60 days would be tolled, however, if the requestor revises the request or complies and presents additional information. CMS seeks comment on whether the final rule should include a further expedited review option for requestors. The healthcare community may be skeptical of this effort as Stark Law questions often are at the intersection of the law and complex Medicare billing rules. Based on current practices, including a significant backlog of CMS reviews of Stark Law self-disclosures, it seems unlikely that expected reviews will be possible, but CMS noting this as a possibility suggests a new emphasis to timely respond to requests and aid the healthcare industry on these complex issues.

3. Hourly Fee Structure and Fee Cap for Preparation and Issuance of Advisory Opinions

Currently, CMS charges requesting parties a consolidated final payment based on costs associated with preparing an advisory opinion. In the proposed rule, CMS proposes to adopt an hourly fee of $220 for preparing an advisory opinion, which it believes accurately reflects the costs incurred by the agency. As mentioned above, CMS is also considering the addition of a further expedited pathway for requestors seeking an advisory opinion on a 30-day timeline. For such expedited requests, CMS proposes a rate of $440 per hour, which it believes reflects the extra resources needed to prepare the opinion on an abbreviated timeline.

To manage costs for requestors and to “prevent unfair surprises to requestors at the end of the process,” CMS is open to implementing a fee cap and is seeking comments on the appropriate amount of such cap as well as whether it should eliminate the initial nonrefundable $250 fee that must be included with each request for an advisory opinion. These proposed changes signal CMS’s desire for input from the healthcare community as to the fees that requestors would be willing to pay as well as an effort to strike an equitable outcome while still encouraging more requests.

4. Expanded Reliance on Advisory Opinions

Currently, as it relates to reliance on an advisory opinion issued by CMS, only the requestor can rely on the opinion, even though the relationship often involves numerous parties. In its proposed rule, CMS proposes to clarify that all parties to an arrangement subject to a favorable advisory opinion be permitted to rely on the opinion, regardless of whether they were an actual requestor of the opinion. Under this proposal, if CMS determines that an arrangement does not violate the Stark Law, the determination would apply equally to any individuals and entities that are parties to the specific arrangement.

CMS also proposes to clarify that the secretary will not pursue sanctions against any individuals or entities that are parties to an arrangement CMS determines is “indistinguishable in all material aspects” from an arrangement that was the subject of a favorable advisory opinion. In other words, CMS will clarify that the healthcare community can use advisory opinions to guide behavior in structuring similar deals — making advisory opinions more important/helpful to the greater community. The question as to whether an arrangement is indistinguishable in all material aspects to an arrangement discussed in a favorable opinion may be submitted as the subject of a separate advisory opinion. Even without this, however, the healthcare community will appreciate this additional guidance. CMS proposes to recognize that individuals and entities may “reasonably rely” on an advisory opinion as nonbinding guidance, which CMS acknowledges is already common practice, but would, if finalized, be expressly permitted.

5. Limited Rescission Authority

Current regulations authorize CMS to rescind or revoke an advisory opinion; however, to date, CMS has not rescinded one advisory opinion. CMS is soliciting comments on whether CMS should retain a more limited rescission authority that would only apply when (1) there is a “material regulatory change” that impacts the conclusions reached or (2) the recipient of a negative advisory opinion requests that CMS reconsider the opinion in light of new facts or new law. Particularly, with it loosening reliance on such opinions, this recession change could be important, impacting many relationships.

* * * * *

Overall, the foregoing proposed changes are encouraging. CMS appears to have listened to the healthcare community’s concerns, including those voiced in a recent request for information, that the advisory opinion process had not historically been utilized for this complex law. In addition, CMS is requesting further comments on the process, suggesting a final rule that may give more flexibility and reliance opportunities. Indeed, CMS expressed its desire to issue more opinions since the Stark Law requires providers to meet an exception, and, thus, favorable opinions will remain narrow and have less chance for abuse as a nonstrict liability statute could.

CMS is accepting comments on its proposal and requests for information until Sept. 27, 2019. Please consult one of the authors if you would like to discuss the potential implications of this proposed rule or submit a comment to CMS. The proposed rule could ease burdens associated with submitting advisory opinions and provide greater clarity to industry members. It may also suggest CMS will begin to issue additional advisory opinions more routinely.