Prepare for the Return of Stark Law Regulations

In the height of the COVID-19 panic, the Secretary of Health and Human Services (HHS) decided to waive many of the restrictions found in the Stark Law. The goal was to increase access to healthcare for those who needed it most because of COVID-19.

However, as the federal government gets ready to end its declaration of a federal state of emergency, the regulations under the Stark Law will likely go back into effect. Healthcare professionals should be aware of this and consider the financial and reporting impact of this change.

Changes to the Stark Law Because of COVID-19

The Stark Law prohibits doctors from referring patients to another provider with whom that doctor has a financial relationship. Physicians making such a referral face economic sanctions under normal circumstances.

The changes to the Stark Law because of COVID-19 essentially removed the potential for any sanctions. This was done largely to support increased patient needs and improve patient visibility during the global pandemic.

The changes also waived the test for fair market value for compensation, rents and other financial arrangements between doctors and other providers. It gave healthcare providers the ability to create new networks and partnerships to improve patient care.

Examples of these relationships include software and technology improvements to provide telehealth services. Some of the relationships were also created to curb the huge revenue decrease that resulted when elective procedures were curtailed for a certain period of time.

Moving Ahead After the COVID-19 State of Emergency

The public health emergency declaration was predicted to expire in mid-July of 2022. However, the date is not yet finalized. President Biden has indicated that he will provide at least a 60-day notice before ending the public health emergency. Nonetheless, compliance will take time, and planning now can be very helpful in ensuring a smooth transition.

As provisions go back into effect, healthcare providers (and their attorneys) need to review their financial relationships to ensure that those currently in place don’t violate the Stark Law. These relationships could include things like:

  • Rental of office space and equipment
  • Payments for professional clinical services or coverage
  • Telehealth arrangements (including both equipment and services)
  • Staff-sharing arrangements
  • Loans to doctors
  • Personal service agreements with individual physicians or groups

Bringing these agreements into compliance can be a challenge, and it may not be an option in some situations. Unfortunately, if agreements were struck quickly in emergency circumstances, there might not be much information to show why it was created or when payments were made.

Ensuring Compliance with the Stark Law

You and your counsel should start the process to ensure compliance with the Stark Law before it is required by the federal government or HHS. the process includes the following steps.

  1. Gather information about the agreement between the parties.

Ensure that the actual activities and payments are documented under the current arrangement. Having this information will help accurately set out the agreement in a new or revised document.

  1. Create a cost analysis and budget.

In many agreements, the parties likely did not have time to create a meaningful or comprehensive budget. As part of the review, create a pro forma budget or cost analysis for the scope of the agreement moving forward. A detailed budget gets everyone on the same page and helps foster the working relationships among everyone involved.

This information is also vital to determine if the terms constitute a fair market value. COVID-19 has had some unique effects on market values for services, including rental values and compensation arrangements. However, having this detailed financial information will help you compare current arrangements with market norms.

  1. Use a competent firm or individual to help you meet the fair market value test.

Enlist CPAs with knowledge of the healthcare industry and the various changes you’ve experienced because of COVID-19. This will help you determine whether the agreement can meet the fair market value test. They will also be able to suggest revisions if the agreement does not meet this test.


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