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Legal Update
from Krieg DeVault LLP
CMS issues rules about Stark Law’s period of disallowance

The Center for Medicare & Medicaid Services (CMS) has issued “bright-line” rules under the Stark Law for “periods of disallowance,” defined as those periods when a financial relationship between a referring physician and a “designated health services” entity fails to comply with a Stark Law exception.

There are three common scenarios that give rise to a period of disallowance during which the physician’s referrals are prohibited and significant repayment obligations result. 

The first scenario occurs when the Stark Law violation concerns the payment or receipt of excess compensation. The period of disallowance begins on the date the arrangement was first out of compliance and ends no later than the date excess compensation – including interest, as appropriate – was returned and all other requirements of the applicable Stark Law exception are met.

The second scenario happens when the Stark Law violation is related to payment or receipt of compensation that is insufficient to satisfy the requirements of an exception. The period of disallowance begins on the date the arrangement was first out of compliance and ends no later than the date the shortfall was paid to the party – and when all other requirements of the applicable Stark exception are met.

The “shortfall” would be that amount, including interest as appropriate, necessary to bring the arrangement into compliance from the date of its inception.

The third scenario deals with a Stark Law violation unrelated to compensation. Rather, the agreement is not in writing as required by the applicable Stark Law exception. The period of disallowance begins on the date the arrangement was first out of compliance and ends no later than the date the arrangement was brought into compliance.

Physicians should be mindful of the Stark Law’s period of disallowance and the significant repayment obligations that can arise due to non-compliance. For questions, contact Leanne Coons at (317) 238-6269 or Susan Ziel at (317) 238-6244.
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