Author: Courtney Patterson

August 5, 2021

Posted on by Courtney Patterson

QUESTION:
“Can you provide a quick guide to the Stark Value-Based Exceptions?”

ANSWER:
While these Rules are difficult to summarize and the devil is in the details, the following is a summary of the Stark Value-Based Rules that became effective on January 19, 2021:

A Value-Based Arrangement is intended to compensate the physician Value‑Based Participants of a Value Based Enterprise for achieving the Value‑Based Purposes of the Value-Based Activity for a Target Patient Population, rather than basing that payment on the items or services furnished by the physicians.

CMS stated in the Preamble to the January 19, 2021 Rules that the anticipated benefits from the Value-Based Rules are to:  improve care coordination for patients; reduce cost to payers and patients from poorly coordinated, duplicative care; improve quality of care and outcomes; achieve substantial reduction in Stark Law compliance costs; and reduce administrative complexity and related waste.

Whether the Value-Based Rules will achieve any or all of these benefits remains to be seen.  What is clear is that the Value-Based Rules have requirements that are significantly different from the requirements in fee-for-service arrangements that were governed by the Stark Rules that have been previously in effect.  The Value-Based Rules have different requirements depending on the level of financial risk assumed by the physician Value-Based Participants.

The Stark exceptions for Value-Based Arrangements went into effect on January 19, 2021 and are found at § 411.357(aa)(1)-(3).  While each Value-Based Exception needs to be considered to determine which will apply,  there are several elements that all of the exceptions have in common: (i) the Value-Based Definitions found at 42 C.F.R. § 411.351; (ii) as the Value-Based Enterprise (“VBE”) and/or VBE participants increase the financial risk assumed, the applicable Stark Value‑Based Exception will allow for increased flexibility; (iii) the traditional definition of Fair Market Value is not required by any of the Stark Value-Based Rules; (iv) the remuneration to the VBE participants cannot constitute an inducement to limit services; (v) the remuneration to the VBE participants cannot be conditioned on the referral of patients who are not part of Target Patient Population; (vi) if remuneration is conditioned on referrals to a particular provider, then the referral arrangement must be in writing, signed by the parties, and must include the three exceptions contained in the Stark directed referral rules; and (vii) records of the compensation methodology used must be retained for six years and provided to HHS upon request.

The Stark Rules then categorize the Value-Based Exceptions based on the level of financial risk assumed with the greatest flexibility provided to a VBE that accepts Full Financial Risk which means the Value-Based Enterprise is responsible on a prospective basis for the cost of all patient care, items and services covered by the applicable payor for each patient in the Target Patient Population for a specified period of time (such as accepting capitation).

The next greatest amount of flexibility is permitted for Value-Based Arrangements with meaningful downside risk to the physicians.  Meaningful Downside Financial Risk requires the physicians to be responsible to repay or forego no less than 10% of the Total Value of the remuneration the physician receives under the Value-Based Arrangement.  Examples of this model provided by CMS in the Preamble to the January 19, 2021 Rules include:  a $50,000 payment, plus $25,000 for Value-Based Activities as long as the entire $25,000 is conditioned on achieving a specified Value-Based Activity for a Target Patient Population; and a $100,000 payment with a $20,000 withhold, so long as the withhold is only payable upon completing the Value-Based Activities for the Target Patient Population.

There is also a Value-Based Exception in which the Physicians are not placed at financial risk.  This is referred to in the regulations as the Value-Based Arrangements Exception, 42 C.F.R.  § 411.357(aa)(3).  This exception protects remuneration paid to the physician participants in the Value-Based Arrangement regardless of whether it is in cash or in kind.  However, due to the fact that the physicians are not at financial risk and are not required to be paid at Fair Market Value, this exception has the most detailed regulatory requirements of any of the Stark Value-Based Rules.

In addition to the terms described above, this exception requires that the Value-Based Arrangement must be set forth in writing that is signed by the parties and describes: (i) the Value‑Based Activities to be undertaken; (ii) how the Value-Based Activities are expected to further the Value‑Based Purposes of the Value-Based Enterprise; (iii) the target patient population; (iv) the type or nature of remuneration; (v) the methodology that is to be used to determine that remuneration; and (vi) the Outcome Measures against which remuneration is assessed.

CMS also requires that at least annually, or at least once if the arrangement is in effect for less than one year, the Outcome Measures must be monitored to determine: (i) whether the parties have provided the Value-Based Activities required by the Value-Based Arrangement; (ii) whether and how the continuation of the Value-Based Activities will further the Value-Based Purposes of the VBE; and (iii) the progress toward the attainment of the Outcome Measures against which the recipient of the remuneration will be assessed.

If this monitoring determines that the Value-Based Activity is not expected to further the Value‑Based Purposes of the VBE, then the VBE has two options in order to maintain compliance with the Stark Law:  (1) terminate the arrangement within 30 consecutive calendar days of the date of completion of the monitoring indicating that the Value-Based Activity was ineffective; or (2) modify the Arrangement to terminate the ineffective Value-Based Activity within 90 consecutive calendar days of completion of the monitoring and, if they choose, replace that Value-Based Activity with a different Value-Based Activity with prospective applicability.

While several differences exist between the Stark Value-Based Exceptions and the OIG Value‑Based Safe Harbors that also went into effect on January 19, 2021, this exception is the greatest point of departure from the OIG Value-Based Safe Harbors (42 C.F.R. § 1001.952(ee)-(kk)).  If a physician is not at financial risk, then the OIG Safe Harbors only protect in-kind remuneration.  (As stated above, the Stark exception protects remuneration in the form of cash or in-kind services.)  That said, payments of cash remuneration in a non-risk setting (such as a cost‑sharing arrangement) may be protected by the amended personal services and management contracts and outcomes-based arrangements safe harbor that was added by the January 19, 2021 Safe Harbor Regulations (see 42 C.F.R. § 1001.952(d)(2)).

July 29, 2021

Posted on by Courtney Patterson

QUESTION:
“We are in the process of reviewing our Medical Staff Bylaws after a long period of neglect. While going over the provisions related to Medical Staff hearings, a Bylaws Committee member suggested that if a practitioner is under precautionary suspension, the hearing should be held within 10 days of the practitioner’s request. Ten days seems like a short time for us to prepare for a hearing. But, a few of the doctors on the committee really felt like it would be most fair to a practitioner whose livelihood is “on hold” to have the hearing occur in the most expedited way possible. What do you think?”

ANSWER:
It’s noble to consider the impact of a precautionary suspension on the practitioner who is affected, but holding a hearing within 10 days of a practitioner’s request will be almost impossible for you to manage, from a practical standpoint. Here’s why:

  • Thirty days is the minimum time you must give the practitioner to decide whether to request a hearing under the Health Care Quality Improvement Act (which provides certain immunities from liability to peer reviewers). Therefore, most organizations’ Medical Staff Bylaws and related documents, like the Medical Staff Credentials Policy, are drafted to give a practitioner 30 days to request a hearing.

Because the practitioner has 30 days to make the request, the hospital never really knows when the practitioner’s request will be received.  The request could come on day one or it could come at the close of business on day 30.  That’s a big window!

This matters because the Bylaws language your Committee member suggested states that you will hold a hearing within 10 days OF THE PRACTITIONER’S REQUEST.  If you don’t know when the practitioner’s request will come in, it will be very difficult to prepare (for example, recruiting hearing panel members who are available to serve).

  • Adding to the complexity here is the fact that the Health Care Quality Improvement Act requires, as a condition of immunity, that the practitioner be given at least 30 days to prepare for the hearing after being provided NOTICE OF THE HEARING. That is, you must give the practitioner 30 days to prepare after you send the notice that includes the time, date, and details of the hearing itself (this is different than the first notice, which tells the practitioner that he or she is entitled to request a hearing).

If a practitioner is subject to a precautionary suspension at the time, he or she may consent to have the hearing held in a shorter timeframe (e.g., 10 days) – but until you obtain the practitioner’s consent, you will not know whether you will be able to hold the hearing within 10 days of the practitioner’s request or, alternatively, after 30 (or more) days.  Again, this lack of knowledge regarding when the hearing may or may not occur will make it incredibly difficult for you to find a hearing panel and schedule the hearing – tasks that are essential to tackle if you are planning to hold a hearing within a 10-day timeframe.

WHAT THIS ADDS UP TO:  Imagine yourself, as a leader, approaching colleagues to see if they would be willing to sit on a hearing panel (which likely would mean giving up at least a couple of evenings and perhaps a couple of working days) – and then telling them that you are not sure when you will need them to do this, but think it will be sometime in the next one to 60 or so days!  It’s difficult enough to recruit a hearing panel member without this level of uncertainty in scheduling.

So, if we can agree that holding a hearing 10 days after the practitioner requests it is not practical, what options exist to provide some expedited assurance of fairness to a practitioner who is subject to precautionary suspension?

  • First, make sure you are considering precautionary suspensions separately from other adverse professional review actions. Try not to lump them all together.  That way, you can expedite the process for reviewing the precautionary suspension (e.g., deciding whether there continues to be an imminent risk to the health or safety of an individual) and, if possible, lift the suspension pending continued inquiry into the underlying matter or work with the practitioner to look for less restrictive alternatives (such as having the precautionary suspension apply to some, but not all, privileges held by the practitioner).
  • Second, in the case of precautionary suspension, provide expedited procedures that are “fair under the circumstances.” These procedures should be outlined in the Medical Staff Bylaws (or related documents, such as the Medical Staff Credentials Policy).  Consider requiring that the MEC meet to review the precautionary suspension within an expedited timeframe (e.g., no more than five or 10 days after the suspension is put in place) to decide whether it should be continued pending further review.  Include an opportunity for the practitioner to meet with the Committee to discuss the concerns and offer input (including suggesting any less restrictive alternatives that might be employed to address the concerns while the review continues – for example, strict compliance with patient selection criteria, the use of a consult/second opinion, etc.).
  • After the above review is conducted, the leadership will determine whether to keep the precautionary suspension in place pending further review. In that case, the Medical Staff leadership should be diligent in proceeding with the review of the underlying matter so that there is not unnecessary delay that prolongs the precautionary suspension period.
  • Finally, if anything changes in the interim, or additional facts are brought to light through the review of the matter, and that changes the assessment of whether an imminent risk exists – it is appropriate for the MEC to revisit the issue and lift the precautionary suspension as soon as plausible.

By way of example, imagine a practitioner was precautionarily suspended after the Hospital learned he had been arrested for harassment of an individual who used to be his patient and who claimed that he continued to stalk her following the end of their relationship.  If you later learned from the police that the charges had been dropped after the patient recanted her story and attested to the fact that their relationship was consensual, the MEC might consider immediately lifting the precautionary suspension (on the basis that the concern of imminent risk has been eliminated), even though it would want to continue its underlying review of the matter (on the basis that a consensual sexual relationship with a patient is nevertheless a concern and ethics violation, even if it does not give rise to a concern of imminent risk).

July 22, 2021

Posted on by Courtney Patterson

QUESTION:
“Over the past several years, our system has created a number of service lines.  Each service line has a physician leader, along with an administrative and nursing leader.  Originally, the focus of the service line was on operational issues.  Now, the physician service line leaders want to be involved in credentialing, privileging, and peer review.  The problem is that our medical staff bylaws don’t mention service line leaders.  What should we do?”

ANSWER:
While most systems have developed service lines using a model similar to the one you described, in our experience, most medical staff bylaws are completely devoid of any reference to the service lines or service lines leaders.  However, it makes no sense for a system’s service lines and its medical staffs to operate in separate silos, especially when there are so many overlapping goals around quality of care and patient safety.  It’s time to act!

We recommend that you start by including references to service lines and service line leaders in your medical staff documents (e.g., bylaws, credentials policy, professional practice evaluation/peer review policy).  Ideally, these documents should reflect the expectation that service line leaders will participate in core medical staff functions, including credentialing, privileging, and peer review.

Your documents should also make it clear that when performing these functions, service line leaders will follow the process outlined in the medical staff bylaws and policies, and that service line leaders are also bound by the same peer review privilege and confidentiality principles.  It’s also important that the medical staff documents expressly allow for credentialing and peer review information to be shared with service line leaders (and vice versa).

The key is to make sure your medical staff documents are not an unnecessary impediment to needed change.  There are likely going to be some challenging discussions about how fully service line leaders should be integrated into core medical staff functions.  But if we keep our focus on doing what’s best for patient care, we will be able to move forward in coordinating service line leaders into medical staff processes and, hopefully, there will be added benefits of improving consistency and uniformity in decision-making throughout the system.

July 15

Posted on by Courtney Patterson

 

QUESTION:
“A physician recently smelled of alcohol and was behaving oddly while conducting rounds.  The physician refused a screening test, so the Medical Staff leadership imposed a precautionary suspension.  Is there a better way?”

ANSWER:
Yes!  First, all hospitals should have a Practitioner Health Policy to govern health issues affecting privileged practitioners.  Such a policy is required if your hospital is accredited by the Joint Commission, and it’s a best practice in any event.  A Practitioner Health Policy allows Medical Staff leaders to identify practices and procedures that work in your setting, and can then be applied in a consistent manner (which helps to avoid allegations of discrimination).

Your Practitioner Health Policy should have a section dealing with responses to immediate threats, such as the one you describe above.  The first step is for the Policy to identify who may respond to handle such situations.  We recommend that a broad group of Medical Staff leaders be authorized to take the steps described in the Policy, to ensure that someone is always available.

The Policy should then identify who, and how many, individuals may request a practitioner to undergo a screening test to identify a possible impairment.  Ideally, two Medical Staff leaders will make such a decision (or a Medical Staff leader and an administrator such as the CMO).  Having two individuals involved in the decision protects them from allegations of bias, and should enhance the credibility of the process in the eyes of the practitioner under review.

To answer your specific question, if the practitioner refuses to cooperate with a screening test, the Practitioner Health Policy should say that the individual automatically relinquishes clinical privileges pending further review by the Leadership Council (or whatever committee handles health issues).  This is not a permanent fix – potentially impaired practitioners would not be permitted to simply move out of town and subsequently harm themselves or others.  Instead, it’s a method of buying time to persuade the practitioner to cooperate with the review process without imposing a suspension.  A suspension causes the situation to feel more confrontational, which sends the wrong message when the goal is to help a colleague.  A suspension also starts the clock ticking for hearings and NPDB reports, which can detract from efforts to constructively deal with the health issue.

For more information about how to deal with practitioner health issues, please join us in Orlando, FL from September 19 – 21, 2021 for the Peer Review Clinic. For more information, click here.

July 8, 2021

Posted on by Courtney Patterson

QUESTION:
“We have an applicant who is refusing to answer one of the questions on our application form because she says that her lawyer told her it could violate a settlement agreement that she has with another hospital.  We think that information is relevant to her request for appointment at our hospital.  Can we still ask for the information?  Should we ask for a letter from her lawyer?  Should the application be held incomplete?”

ANSWER:
Yes!  Credentialers have a duty to review all of the relevant qualifications of each applicant for Medical Staff appointment and clinical privileges and cannot allow the legal interests of an applicant, in an unrelated matter, to interfere with that duty.  Accordingly, the Medical Staff Bylaws (or related policies) should state very clearly that every applicant bears the burden of submitting a complete application and of producing information deemed adequate by the hospital for a proper evaluation of current competence, professional conduct, character, ethics, and other qualifications – and for resolving any doubts.

A similar issue arose in a 1997 case, Eyring v. East Tennessee Baptist Hospital, 950 S.W.2d 354 (Tenn. Ct. App. 1997), in which a physician applicant refused to sign a release form authorizing a hospital where he had previously practiced to send information to another hospital where he had submitted an application.  The physician argued that he received legal advice that signing the release could compromise his lawsuit against the other hospital, which had revoked his privileges.  The court held that because the physician had not provided the additional information that the hospital requested – regardless of the fact that a settlement agreement was in place – he had not submitted a complete application and, thus, under its Bylaws, the hospital was not required to process his application further.

July 1, 2021

Posted on by Courtney Patterson

QUESTION:   “In reference to the case in this week’s HLE, does EMTALA apply to inpatients?”

ANSWER:      The obligations under EMTALA do not apply to a hospital once a patient is admitted as an inpatient in good faith.

However, the issue in the Harmon case was whether the patient had been formally admitted as an inpatient or simply placed in observation. If it is ultimately determined that the patient had been admitted as an inpatient, then he will no longer have a claim under EMTALA, as the Hospital’s obligation to effectuate an appropriate transfer would have ended prior to his attempt to kill himself by jumping out of the car during the transfer to the other facility.

Conversely, if it is determined the patient was put into observation but not admitted as an inpatient, he will be free to pursue his EMTALA claim. This is because CMS has stated that such action does not end a hospital’s EMTALA obligations. This can be found in the Interpretive Guidelines, which state:

“Individuals who are placed in observation status are not inpatients, even if they occupy a bed overnight. Therefore, placement in an observation status of an individual who came to the hospital’s [emergency department] does not terminate the EMTALA obligations of that hospital or a recipient hospital toward the individual.” (Emphasis added)

TAG A-2411/C-2411, Rev. 191,07-19-19

The court in Harmon cites entries in the patient’s medical record that support both arguments (i.e., that the patient was admitted vs. put into observation), so it declined to make a finding on this factual question at this point in the litigation.

June 24, 2021

Posted on by Courtney Patterson

QUESTION:   “Since the new Stark regulations came out late last year, can we still require our employed physicians to refer patients to our hospital or other providers in our health system?”

ANSWER:       Yes.  The amendment to the Stark regulations set forth a separate section on “directed referrals” at 42 CFR §411.354(d)(4) which permits physician compensation in employment relationships, personal service arrangements and managed care contracts to be conditioned on the physician’s referral of patients to a particular provider, practitioner or supplier as long as the physician is paid fair market value, agreement is in writing and subject to the following exceptions:  (i) the patient expresses a preference for a different provider, practitioner or supplier, (ii) the patient’s insurer determines the provider, practitioner or supplier, or (iii) the  referral is not in the patient’s best medical interests in the Physician’s judgment.  The required referrals must relate solely to the services covered by the contract in question.

The regulations go on to say that neither the existence of the arrangement or the amount of compensation can be contingent on the directed referrals.  However, an established percentage or ratio of the physician’s referrals to the designated providers can be required.  In other words, a directed referral provision in an employed physician’s contact could not provide that the physician’s compensation would be cut if the physician does not refer patients to the hospital, but it could require that a certain percentage of the physician’s patients who require hospitalization are sent to the hospital – subject always to the three exceptions.

But beware!  Although the Stark regulation says that personal services arrangements can contain a directed referral requirement, there is no corresponding directed referral language in the Anti-kickback safe harbors.  The only protection there would be the bona fide employment exception, so requiring independent contractors to refer to the hospital would be risky.

Want to know more about this or other provisions in the new Stark regulations? Contact Dan Mulholland or Henry Casale or call 412-687-7677 to schedule an appointment.

June 17, 2021

Posted on by Courtney Patterson

QUESTION:   “We have a mandatory COVID-19 vaccination program for our employees.  If an employee has an adverse reaction to the vaccination, are we required to record it in our Occupational Safety and Health Administration (“OSHA”) 300 log?”

ANSWER:      No, not at this time, but here’s the background.  On April 20, 2021, in its FAQs, OSHA stated that an adverse reaction would be recordable if the injury or illness was work-related (OSHA’s position was that if the vaccine was mandated by employers, it was work-related), it was a new case, and the illness met one of the recording criteria (days off of work, restricted work, medical treatment beyond first aid, etc.).  However, OSHA has since updated its guidance and has stated that at this time it will no longer require employers to record those events since it might disincentivize employers’ vaccination efforts.  OSHA stated that it won’t enforce the rule until May 2022.

June 10, 2021

Posted on by Courtney Patterson

QUESTION:   “Can our hospital impose a requirement that all Medical Staff members get a COVID-19 vaccine?”

ANSWER:      While we are aware of some hospitals that are considering making COVID-19 vaccination mandatory for their Medical Staffs, most have not yet implemented such a policy.  We should also note that at least one health system is subject to a class action lawsuit filed by 117 of its employees because of its policy requiring employees to be vaccinated against COVID-19. Read about it here.

While the COVID-19 vaccination is proving to be remarkably effective in controlling the spread of the virus, one of the things that is holding some hospitals and health systems back is that the vaccine is currently under emergency use authorization, rather than the full vaccine authorization normally granted by the FDA.  However, at least two pharmaceutical companies are seeking full authorization from the FDA.  On May 7, 2021, Pfizer requested full approval for their COVID-19 vaccine from the FDA.  Moderna followed suit on June 1, 2021.

As noted above in Your Government at Work, the EEOC, in its updated guidance, emphasized that the federal employment equal opportunity laws do not prevent employers from requiring COVID-19 vaccinations, subject to reasonable accommodation provisions and other equal employment considerations.  But, the EEOC also notes that it is beyond its jurisdiction “to discuss the legal implications of [emergency use authorization] or the FDA approach.”

The section of the federal Food, Drug, and Cosmetic Act allowing emergency use authorization requires that individuals to whom a product subject to emergency use authorization is administered are informed of “the option to accept or refuse administration of the product, of the consequences, if any, of refusing administration of the product, and of the alternatives to the product that are available and of their benefits and risks.”  A reasonable interpretation of this statute would give any individual the right to refuse a vaccine that has only been given emergency use authorization and thus preclude mandates.  A counter-interpretation is that an individual must be informed of the consequences of refusal to accept an emergency use authorization vaccination, such as, for example, automatic relinquishment of clinical privileges.

Nonetheless, if you do decide to move forward with a COVID-19 vaccination requirement, you want to make sure that it is consistent with your Medical Staff Governance Documents and Hospital policies.  There should not be anything to keep you from proceeding, but you will want to confirm this.  You will also want to check if your documents permit you to mandate any vaccines.  If they do, this could set the groundwork for a COVID-19 vaccine requirement.  For example, Medical Staff Bylaws often already require influenza vaccination.  Further, many Bylaws include a threshold eligibility criterion for appointment and privileges stating that an individual must complete all required health screenings and vaccinations prior to providing any patient care at the hospital and any appointment/privileges granted by the Board are conditioned on the individual’s compliance with those requirements.  If you have this threshold eligibility criterion language, it should be broad enough to include a COVID-19 vaccination requirement in a separate policy.

June 3, 2021

Posted on by Courtney Patterson

QUESTION:   “I know that the Stark law covers a lot of seemingly innocuous activities. But surely Stark does not affect the ability of the MEC to serve food and drinks at an off-site medical staff meeting – Can it???”

ANSWER:      As you may have guessed – the answer is YES.  But, do not despair, there are several ways to comply with the law.

Any time that a hospital provides remuneration to a physician, the arrangement must satisfy an exception to the law.  Unfortunately, the Stark law defines “remuneration” so broadly that any meal or gift that a hospital provides to a physician will be considered to be “remuneration” and so the law will apply.  Once the law applies, you must find an exception that will permit the proposed conduct.

The fact that the meeting will he held off campus will limit the exceptions that might otherwise apply.  But even still, the good news is that the hospital gets to choose the exception that applies and depending on the facts, there are several exceptions from which to choose to address the meals to physicians provided at a committee meeting or at an educational event.  Also, you should be aware of a new Stark exception that became effective on January 19, 2021, that will be very helpful in situations such as what you have described.

Employed Physicians
The Stark law provides the greatest amount of latitude when a hospital provides the meal or other benefit to an employed physician.  Most meals and other medical staff benefits provided to an employed physician should be considered to constitute employment related fringe benefits and are covered by the Stark employment exception.

For the purpose of your question, we will assume that the Physicians who will receive the meals or other medical staff benefits are not Hospital employees – but we wanted to mention the Employment exception in case it can be used to minimize the record keeping that will be required by the exceptions that are described below.

Non-Employed Physicians
When dealing with non-employed physicians, the Stark law divides meals and other medical staff benefits into two categories – (1) non-monetary compensation that may be provided anywhere, have no individual per gift limit, but are subject to an annual cap; and (2) medical staff incidental benefits that must be provided on the hospital campus, have a per item limit but no annual limit.  Depending on the facts, other exceptions may apply as well.  However, the two meal related exceptions work like this:

(1)        Non-Monetary Compensation Exception
The “nonmonetary compensation” exception (42 C.F.R. §411.357(k)) permits compensation in the form of items, meals or gifts (but not cash or cash equivalents) that do not exceed the then applicable limit in any Calendar Year, adjusted for inflation.  When this exception was adopted, this amount was $300/Calendar Year.  However, this amount is annually adjusted for inflation and the annual limit for Calendar Year 2021 is $429.  CMS updates this amount annually, and the current annual limit may be found at http://www.cms.hhs.gov/PhysicianSelfReferral/10-CPI-U-Updates.asp.

Even when indexed to inflation, the $429 maximum in Calendar Year 2021 makes this exception of limited utility.  Furthermore, in order to satisfy this exception, the hospital must track all such items, meals or gifts, the item, meal or gift must not be determined in any manner that takes into account the volume or value of referrals or business generated by the referring physician and may not be solicited by the physicians.  However, there is no requirement that the meal or other benefit be provided on the Hospital’s campus.

In case it is needed, this rule also provides:  (1) no more often than once every three years, a physician who has inadvertently received non-monetary compensation of up to 50% in excess of the then applicable annual limit, may repay the excess within the earlier of the same Calendar Year or 180 days of receipt of the excess, but this exception may be used only once every three years with respect to the same physician.  In addition, a hospital may provide one medical staff function per year for the entire medical staff without regard to any monetary limit.

In order to comply with this exception, the hospital must track the value of all of the nonmonetary compensation that is provided to each physician during each Calendar Year.  However, this can be done by taking the cost of the event and dividing that cost by the number of physicians who attended (you do not need to track what each physician may eat).  Also, this exception does not include any geographic limitation.

(2)        Medical Staff Incidental Benefits
The other meal/gift related exception that applies to non-employed physicians is the “Medical Staff Incidental Benefits” exception (§411.357(m)).  While it is helpful that CMS has recognized that the Stark regulations should include an exception that recognizes a number of traditional relationships between a hospital and the physicians who are appointed to its medical staff, this exception is still relatively narrow and has a number of requirements, including the requirements that the item or services be offered to all staff members practicing in the same specialty without regard to the volume or value of their referrals to the hospital, provided only during periods when the medical staff members are making rounds or are engaged in other activities that benefit the hospital or its patients, used by the medical staff member “on the hospital’s campus,” be reasonably related to the delivery of medical services at the hospital, and not intended to induce referrals.

Also, the compensation must be of low value.  Originally, each item was valued at $25 or less, and subject to the same inflation adjustment used in the non-monetary compensation exception.  In Calendar Year 2021 this amount has been adjusted to $37 per occurrence.  Future updates can be found at the same area of the CMS website as the update for non-monetary compensation.  However, there is no annual limit and so there is not the same need for the per physician records to be maintained as there is for the above-described exception – but the hospital should keep records of the incidental benefits provided and their costs.

This is the so-called “free lunch exception.”  Therefore, assuming that all of the requirements to the exception are met, a hospital may provide free meals, free parking or any other “on campus” incidental benefit that it normally provides to all members of its medical staff practicing in the same specialty without fear that that benefit will be construed as a prohibited compensation arrangement, so long as each individual benefit (i.e., each meal) is less than $37 in 2021 even if the aggregate value of all of the benefits provided to a physician over the course of a year exceeds  $429 in Calendar Year 2021.  That said, based on the facts that you have provided (i.e., the off-campus location of the meeting), this exception will not apply.

(3)        Compliance Training Exception
There is a broad exception that permits a hospital to provide compliance training to a physician or to a physician’s staff, so long as the training is “held in the local community or service area” 42 C.F.R. §411.357(o) Compliance training is defined in this exception and is pretty broad – so it should apply to a medical staff committee meetings and most medical staff educational meetings. While the exception will permit the hospital to provide the training and CME so long as compliance training is the primary purpose of the program, this exception does not address serving food at the training.  While this exception should protect the training itself that you have described, we do not recommend relying on this exception to serve food at any such program.

(4)        Limited Remuneration to a Physician Exception – Added January 19, 2021
A new exception that became effective on January 19, 2021 will apply to a number of situations, including the one that you have described if none of the other exceptions apply. It does not require a written agreement, is very broad and permits a payment of up to $5,000 per Calendar Year per physician (with the $5,000/Calendar Year limit to be indexed to inflation in the same manner as the two exceptions described above).

Since this exception is new there is no case law interpreting.  However, it does not require a written agreement and is very broad.  While it has the disadvantage of requiring the hospital to track the amount paid to each physician each year (we recommend that you determine the amount/physician in the same manner described above), it will, in our opinion, cover the training that you described and much more.

We recommend relying on this exception first and should the $5,000/Calendar Year limit be exhausted then you may rely on the nonmonetary exception described above for the balance of the then applicable annual benefit.