CMS Ends Long Delay and Issues Self-Disclosure Settlements

After almost a year and a half of waiting, the Centers for Medicare & Medicaid Services (CMS) has issued settlement announcements for four providers under the federal Voluntary Self-Referral (Stark) Disclosure Protocol (SRDP). Despite a reportedly significant number of self-disclosures, CMS has delayed announcing any Self-Disclosure settlements leaving providers with very little guidance on how much leniency the agency will grant providers who utilize the protocol to self-disclose technical Stark II violations. Two of the announced settlements had very small fines ($6,700 and $4,500), while the other two had larger civil fines ($130,000 and $579,000).

Stark Self-Disclosure Protocol
CMS issued the Stark Self-Disclosure Protocol on September 23, 2010 and later revised it on May 6, 2011. Congress required CMS to develop a self-disclosure protocol for violations of Stark II under Section 6409 of the Affordable Care Act, because it recognized that many providers have discovered they inadvertently violated one of Stark II’s bright-line requirements. The civil penalties that can result from inadvertent and technical violations of a Stark II requirement have financially devastated providers. A technical violation of a Stark II exception for even one financial relationship can carry significant civil fines and other penalties. For example, a Medical Director Agreement that was inadvertently unsigned or taking a physician to dinner one too many times would subject the hospital to civil fines of $15,000 for every Medicare referral by that physician plus repayment and other penalties. Congress enacted the Self- Disclosure Protocol to provide some relief to providers.

The idea behind the Stark Self-Disclosure Protocol was to allow providers to self-report Stark II violations and receive lower penalties than the provider would otherwise incur. The goal was to encourage compliance, self-auditing, and relieve CMS from some of its enforcement burdens. Unfortunately, in making its announcement, CMS specifically declined to promise that self-disclosing providers would receive any reduction in their penalty. This statement, along with the almost total lack of guidance regarding how CMS would evaluate Stark II violations under the SRDP, left providers with little choice but to cross their fingers when making a submission under the Stark II Self- Disclosure Protocol.

Four Settlements
While the new settlement announcements do provide some guidance, the guidance is limited. The announcements only contain a brief one sentence description of the violation and the penalty amount. There is no analysis of what factors, positive or negative, CMS considered when determining the settlement amount. Nevertheless, the announcements do seem to support the widely held presumption that the more technical the violation, the lower the fine.

A. Non-Monetary Compensation Exception Violations
Two of the settlements, dated January 5, 2012, involved hospitals that disclosed a Stark II violation by exceeding the calendar year non-monetary compensation limit for a physician. Under the Non-Monetary Compensation Exception, hospitals may provide a physician with non-monetary compensation up to an annual limit that was initially $300 but has been adjusted for inflation. The annual limit for 2012 is $373. CMS was willing to settle these two violations with fines of $4,500 and $6,700. There is no analysis on how the amounts were determined. Interestingly, the smaller $4,500 fine was for violations involving two physicians, whereas the larger $6,700 fine only involved one physician.

While this lack of analysis can be frustrating for providers facing a possible decision to self-disclose a Stark II violation, the settlements do provide some guidance for hospitals discovering violations of the non-monetary benefit exception and, by extension, the medical staff incidentals benefit exception. Providers should be cautioned, however, that it is impossible to know how big of a civil fine the hospital could have incurred or any of the circumstances surrounding the reported violations. It is also impossible to know the comprehensiveness of each hospital’s compliance plan. What is certain is that providers should not use the small fines as an excuse to no longer track non- monetary compensation and medical staff incidental benefits as diligently as possible.

B. Personal Services Arrangements Exception Violations
The other two announced settlements, dated February 10, 2011 and November 9, 2011, relate to a disclosing hospital’s violation of the Stark II Personal Services Arrangements Exception. In one settlement, a Massachusetts general hospital self-disclosed that it had violated the Personal Services Arrangements Exception in connection with “certain hospital department chiefs and medical staff leadership services” and arrangements with physician groups “for on-site overnight coverage for patients at the Hospital.” CMS settled the violation for $579,000. The other settlement involved a Mississippi Critical Access Hospital that self-disclosed a violation of the exception “with certain hospital and emergency room physicians.” CMS settled the violation for $130,000.

Unfortunately, there is no analysis on whether these violations were due to something as technical as ensuring the agreements referenced a Master List or were signed by both parties prior to providing services or something as substantive as paying more than fair market value for the services. Consequently, the settlements are less useful when a provider is faced with possibly self-disclosing a Stark II violation with one of its Medical Director or Call-Coverage agreements. For instance, it is impossible to tell if the $130,000 settlement with the Mississippi hospital was lower because it involved emergency room physicians, who are typically not referral sources, or because the violation was more technical in nature than the larger settlement with the Massachusetts hospital.

Conclusion
Hospitals should review their compliance plans, physician agreements and other financial arrangements with physicians or members of the physician’s immediate family to ensure the arrangements meet a Stark exception. Diligence and good faith compliance efforts will not only help the hospital avoid violations, but will also certainly help minimize the financial impact of any inadvertent Stark violations.