Brief Your CEO: It May Become Easier to Get CMS Stark Clearance for Business Deals with Referral Sources

Part of the challenge of running a lab compliance program is making your officers aware of how business transactions your lab makes with a physician that refers patients to you for testing creates the risk of liability under the Stark Law. That’s why it’s crucial to go to great pains to structure your deals so they don’t cross the Stark Law lines. Unfortunately, you can never be totally sure if your arrangement complies. One of the best ways to allay your concerns is by asking the OIG for an advisory opinion. If the OIG blesses the arrangement, you can feel good about proceeding; if not, you can take the proposed deal off the table or restructure it to address the OIG’s Stark Law concerns. At least that’s how it’s supposed to work. But in the real world, getting Stark Law advisory opinions is tricky and thus not resorted to as often as you’d expect. The good news that you should convey to your C-Suite is that getting an advisory opinion may be back in play soon. In late July, CMS proposed to update the advisory opinion process to make it easier for labs and other providers to get an OIG determination about whether a proposed business arrangement would violate the Stark Law. Here are the key things you need to know to brief your CEO and officers on the situation. The Current Process The first thing the officers need to understand is how the current CMS Stark Law advisory opinion process works. The process is modeled on the one the OIG uses to issue advisory opinions under Stark’s sister law, the Anti-Kickback Statute (AKS). That’s not surprising. After all, both laws are designed to prevent conflict of interest and payment for referrals. But there are also important differences between the laws that makes the AKS advisory opinion model unsuitable for Stark. For one thing, Stark Law advisory opinions are more badly needed. Explanation: 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. But in spite of this, CMS has issued only 30 advisory opinions since the advisory opinion regulations were adopted in 1998. Another big difference is that unlike the case with AKS, only the requestor, i.e., the provider that asks for the advisory opinion, is allowed to rely on a Stark Law advisory opinion. In other words, the opinion doesn’t apply to the other non-requesting parties to the arrangement nor third parties seeking to use the advisory opinion as guidance for their own transactions. That substantially limits the value of an advisory opinion. The 5 Proposed Changes The fact that the Stark Law process is troubled has been obvious to providers for decades. But CMS didn’t get the memo. For CMS, the need to fix the Stark Law advisory opinion process came to light in July 2018 when the agency issued a Request for Information (RFI) on adapting Stark to value-based care. See Lab Industry Report (LIR), July 16, 2018. The advisory opinion process was the subject of many of the comments, even though it wasn’t one of the issues listed in the RFI. The good news is that CMS got the message and decided to tinker with the process. The July 2019 proposal suggests five changes to the Stark Law advisory opinion process that you should go over with your officers. 1 Broaden Scope of Issues Advisory Opinion Can Cover  Current Process: CMS will not provide a Stark Law opinion if:

• The request is not related to a named individual or entity;
• CMS is aware that the same or substantially the same course of action is under investigation or is or has been the subject of a proceeding involving HHS or another governmental agency; or
• The agency believes that it can’t make an informed opinion or could only make an informed opinion after extensive investigation, clinical study, testing or collateral inquiry.

Proposed Change: The agency wants to loosen these restrictions so it can issue advisory opinions on any conduct that’s the subject of a current government investigation or other proceeding. 2 Shorten Timeline for Issuing Advisory Opinions  Current Process: CMS has 90 days to issue a Stark Law opinion, as compared to the 60 days the OIG has to issue an AKS advisory opinion. Proposed Change: CMS proposes to shorten the deadline to 60 days, which would begin on the date that CMS formally accepts the request for an advisory opinion. The clock would also continue to tick while a request is revised and/or while CMS awaits information from the requestor. CMS is even considering providing an option to request an expedited 30-day review. 3 Ease Certification Requirements  Current Process: Labs and others requesting advisory opinions must certify that, to the best of their knowledge, all of the information provided as part of the request is true and correct and constitutes a complete description of the facts on which the advisory opinion is being requested. Of particular interest to your officers is the rule that if the lab is a corporation, the certification must be signed by the CEO or comparable officer. Proposed Change: CMS proposes to allow the certification to be signed by any officer that’s authorized to act on behalf of the lab requesting the advisory opinion. Alternatively, CMS is considering whether to eliminate the certification requirement altogether since it may be unnecessary given that federal laws already exist that criminalize the submission of material false statements to a federal agency. 4  Revise Fee Structure for Processing Advisory Opinions  Current Process: 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. Proposed Change: 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  Current Process: Only the provider that requests a Stark Law advisory opinion is legally allowed to rely on it. CMS takes the position that persons who aren’t a party to the transaction may misuse an advisory opinion to evade liability. Proposed Change: 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 is 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. 6 Stark Law Advisory Opinion Process Changes Still on the Table Remind your officers that the July proposals are just that—proposals and that the agency is still fielding public comments. Among the issues CMS is still considering is whether it should:

1. Remove limits on the universe of individuals and entities that can rely on an advisory opinion;
2. Add language listing the permissible uses of an advisory opinion;
3. Limit its right to rescind an advisory opinion to only when: (1) there’s a material regulatory change that impacts the conclusions reached; or (2) a party that receives a negative advisory opinion asks the agency reconsider in light of legal or factual developments;
4. Issue advisory opinions based on hypotheticals or general questions of interpretation;
5. Establish an expedited process for obtaining advisory opinions; and
6. Cap fees for advisory opinions and/or eliminate the initial fee.

 What is the CMS Not Proposing? While the proposed changes are certainly welcome, let your officers know about one of the changes that didn’t make the cut. Specifically, CMS is sticking to its guns about not accepting advisory opinion requests based on hypothetical fact patterns. Many RFI commenters called on CMS to allow advisory opinion requests that involve hypothetical fact patterns and general questions of interpretation, especially given the strict liability nature and outsized payment penalty risks for violations of the law. CMS, however, for the time being, declined to expand the scope of requests it will consider to hypotheticals or general interpretation questions, but agreed to accept comments on whether CMS should propose such an expansion in the future. CMS declined to do so at this time out of concern that the agency would be overwhelmed with requests. CMS, however, will consider requests for opinions that involve existing arrangements and arrangements into which the requestor plans to enter.