Changes in Federal Enforcement Cases and the Stark Law May Benefit Health Care Providers

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March 16, 2018

Some recent changes in federal law and in federal agency interpretation of federal law may both clarify and relieve some regulatory obligations of health care providers.

Lessening Dependence on Federal Agency Interpretations of Federal Law

In late January, a high ranking official of the U.S. Department of Justice (DOJ) told DOJ litigators they can no longer use the Justice Department’s own interpretations of the laws it enforces as proof someone has violated the law.

Back in November 2017, U.S. Attorney General Jeff Sessions issued a memorandum stating that the DOJ is prohibited from issuing what are commonly called “guidance documents” that “purport to create rights or obligations binding on persons or entities outside the Executive Branch”.  These guidances have represented in the past that they have the full force of law, and have in effect created standards by which the DOJ determined compliance with laws and regulations.  The attorney general stated that he was concerned the use of guidance documents circumvents the notice-and-comment rulemaking required by law.

The January communication, already called the “Brand Memo” after its author, Associate Attorney General Rachel Brand, prohibits the DOJ from using guidance documents to create “de facto regulations”.  Effective immediately, the DOJ may not, in civil cases, “use its enforcement authority to effectively convert agency guidance documents into binding rules”.  And, significantly, Ms. Brand stated that DOJ litigators (including U.S. Attorneys) cannot attempt to prove that someone violated the law because of a failure to comply with guidance documents.

This is a significant development because, up to now, guidance documents have been regularly relied upon by federal litigators attempting to prove violations of federal law, including health, safety, and environmental laws and the False Claims Act.  DOJ attorneys can no longer rely on their department’s guidance document interpretations to prove non-compliance, which could vary with changes in personnel and administrations.

Loosening of the Stark Law?

Recently, Ruder Ware attorney John Fisher issued a blog article entitled “Will Centers for Medicare & Medicaid Services (CMS) Really Make Changes to the Stark Law?”.  In a somewhat related development (and a segue from the above discussion on guidance documents), new federal legislation has officially adopted guidance that had previously been issued by the Centers for Medicare and Medicaid Services which has the effect of loosening a few provisions of the Stark Law.

Among its many technical requirements, the Stark Law requires that certain “compensation agreements” be in writing.  A compensation agreement is an agreement involving direct or indirect cash or in-kind remuneration between a physician, or an immediate family member of a physician, and an “entity” (with some exceptions).

The new Bipartisan Budget Act of 2018, which became law last month, provides the requirement that a compensation agreement be in writing may be satisfied through “a collection of documents”, which may include “contemporaneous documents evidencing the course of conduct between the parties involved”.  In addition, the requirement that a compensation agreement be signed by the parties can be met by obtaining the signatures within 90 days from the date the agreement should have been signed, if the agreement is otherwise in compliance.

The Budget Act also allows for otherwise-exempt office space and equipment leases and personal services agreements that have expired to retain their exempt status during the “holdover” period, if the holdover terms and conditions remain the same.

These revisions to the Stark Law may not seem all that significant on the surface, but they do have the potential to give some relief from requirements which previously could trigger the strict liability provisions of the Stark Law.

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