Legal Intelligencer article by Lamb McErlane PC Health Law Attorneys
Vasilios J. Kalogredis[i] and Rachel E. Lusk.

On November 15, 2019, the Centers for Medicare and Medicaid Services (CMS) issued a final rule updating its advisory opinion regulations, codified at 42 C.F.R. §§ 411.370 through 411.389.  The updated regulations liberalize and improve CMS’s process for issuance of advisory opinions on the application of the federal physician self-referral law (“Stark Law” or “Stark”).  These regulatory changes went into effect on January 1, 2020.

Background

Under the CMS advisory opinion process, parties can seek guidance on whether a physician’s referrals for certain designated health services payable by Medicare to an entity with which he or she (or an immediate family member) has a financial relationship are prohibited under the Medicare program by section 1877 of the Social Security Act. The purpose of the advisory opinion process is to provide a binding opinion concerning the application of section 1877 of the Act to specific factual situations.

In the twenty years since the CMS advisory opinion regulations were issued in 1998, the agency has only published 16 advisory opinions.  In June 2018, CMS issued a Request for Information (“RFI”) as part of the “Regulatory Sprint to Coordinated Care” about ways CMS could modify the Stark Law regulations in order to reduce barriers to patient care coordination and value-based arrangements and to reduce the regulatory burden of complying with the Stark Law generally. CMS did not specifically solicit comments regarding the Stark advisory opinion process in the RFI, but CMS received a number of comments about ways that the Stark advisory opinion process could be improved.

In the preamble to its final rule, CMS explained that it “undertook a fresh review” of the advisory opinion process in light of the comments it received to “identify limitations and restrictions that may be unnecessarily serving as an obstacle to a more robust advisory opinion process.”  While the changes to the advisory opinion regulations do not directly relate to the shift to a value-based health care delivery system, CMS acknowledged that “a faster and more robust advisory opinion process facilitates the shift to value-based care arrangements by providing more guidance for parties trying to understand how the physician self-referral law applies in an evolving and innovative marketplace. This will help to reduce provider burden by providing insight into what does and does not comply with the law, which encourages innovation.”

In recognizing the importance of an accessible advisory opinion process, CMS acknowledged that the former advisory opinion process had not been widely used.  “An accessible advisory opinion process is particularly important in the context of the Stark Law, since it is a strict liability statute,” and there is a great need for certainty because, as CMS acknowledges, “parties that act in good faith may nonetheless face significant financial exposure if they misunderstand or misapply the law’s exceptions.”

Reliance on Advisory Opinions (§ 411.387)

One of the most significant changes to the Stark advisory opinion process is the expansion of the scope of individuals who may rely on an issued advisory opinion.  Under the former rules, only the individual or entity that requested the advisory opinion could rely on and be protected by that opinion.  Under the new rules:

• An advisory opinion is binding on the Secretary of Health and Human Services (HHS), and a favorable advisory opinion means that sanctions will not be imposed under the Stark Law with respect to individuals/entities that are parties to the arrangementupon which the opinion was issued (as well as the individuals and entities that requested the opinion).

• The Secretary of HHS will not pursue sanctions under the Stark Law “against any party to an arrangement that CMS determines is indistinguishable in all its material aspects from an arrangement with respect to which CMS issued a favorable advisory opinion.” Parties can submit an advisory opinion request to determine whether CMS would view their arrangement as “indistinguishable in all material aspects” from another arrangement that has received a favorable opinion on an expedited basis (defined as 30 “working days”).

• Individuals and entities may now rely on advisory opinions “as non-binding guidance that illustrates the application of the physician self-referral law and regulations to the specific facts and circumstances described in the advisory opinion.”CMS acknowledges that stakeholders already use advisory opinions to inform their decision-making, and this change is intended to make clear that “such reliance is permissible and reasonable.”

Notably, CMS makes it clear that a reasonable reliance on an advisory opinion is not sufficient to defeat a claim under the False Claims Act.

 Timeline for Issuing Advisory Opinions (§ 411.380)

The new final rules change the current advisory opinion timeframe from 90 days to 60 “working days”, which will begin on the date that CMS formally accepts a request for review.  CMS will formally accept a request for review when it determines that: (a) the request and any supplemental submissions describe the arrangement at issue with a level of detail sufficient for CMS to issue the opinion, and (b) the grounds for rejection of a request listed at § 411.370(e). CMS will maintain the discretion it has in existing regulations to extend this time period when a request involves “complex legal issues of first impression or highly complicated fact patterns” and to suspend the time period in certain circumstances.

 Advisory Opinion Fees (§ 411.375)

 The final rule disposes of the previously required $250 initial fee and implements a $220 hourly rate for advisory opinion requests.

Matters Subject to Advisory Opinions (§ 411.370) 

CMS has further clarified situations in which it would accept a request to issue an advisory opinion: 

• CMS will now consider advisory opinion requests that “relate to” existing or planned arrangements, rather than requests that “involve” them, which is intended to capture the scope of appropriate advisory opinion requests. 

• CMS reiterates that requests regarding “hypothetical facts or general questions of interpretation” are not appropriate for an advisory opinion. Requests must be about a specific referral, physician, financial relationship and facts/circumstances. CMS does acknowledge, however, that there is some confusion over what is a planned arrangement versus a hypothetical arrangement, and removed this language from the advisory opinion regulations. It also revised the regulatory text to reflect its view that a request for an advisory opinion would not be accepted if the claim could not be billed to Medicare for some reason unrelated to the Stark Law.
• CMS has been given more flexibility related to advisory opinion requests that involve conduct that is “substantially similar to conduct that is under investigation or is the subject of a law enforcement proceeding” involving HHS or another agency.

 Certification Requirement (§ 411.373)

The final rule now allows any authorized officer of a corporation, in addition to the Chief Executive Officer, to sign the certification statement.

 Rescission (§ 411. 382)

Under the former rules, CMS could rescind or revoke an advisory opinion only if it determined that it was in the public interest to do so.  The new rules state that CMS may rescind an advisory opinion for “good cause”, which exists when “(i) there is a material change in the law that affects the conclusions reached in an opinion; or (ii) a party that has received a negative advisory opinion seeks reconsideration based on new facts or law.”  The new rule also requires CMS to provide advance notice to the requestor and the public of a rescinded opinion.

Conclusion

 With these updated regulations, CMS has expanded the scope of individuals and entities who may rely on advisory opinions as binding guidance and provided a process for non-requestors to seek a determination from CMS on whether an arrangement is indistinguishable in all material aspects from one which is the subject of an opinion issued to another individual or entity.  Importantly, CMS has also clarified the scope of advisory opinion requests it will accept that relate to existing or planned (versus hypothetical) arrangements for stakeholder’s to confirm they are compliant with the Stark Law requirements.

[i] Rachel E. Lusk, Esq., an associate at Lamb McErlane PC who focuses on health law and healthcare litigation, assisted with preparing this article. rlusk@lambmcerlane.com, phone, 610-701-4416.

Vasilios J. “Bill” Kalogredis has been advising physicians, dentists, and other health care professionals and their businesses for over 40 years.  He is Chairman of Lamb McErlane PC’s Health Law Department.  bkalogredis@lambmcerlane.com ; phone, 610-701-4402; or fax, 610-701-3275.

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