CMS Proposes Changes to its Stark Law Advisory Opinion Process

Deep in the Physician Fee Schedule proposed rule (the "PFS") released on July 29, 2019, CMS proposed to amend the advisory opinion regulations for the Physician Self-Referral Law, 42 U.S.C. §1395nn (the “Stark Law”). The proposal is scheduled to be published in the Federal Register on August 14, 2019, and comments from stakeholders will be due no later than October 13, 2019. 

In the twenty years since the CMS advisory opinion regulations were issued in 1998 at 42 C.F.R. §§ 411.370 – 411.389, the agency has only published 15 advisory opinions. CMS has indicated it wants to change that trend. Yet, these proposed regulations do little to encourage parties to submit new advisory opinion requests, making it unlikely that the current trend will change. CMS has opened the door for potential new requests, but has also demonstrated a reluctance to significantly amend the process. The 60-day comment period gives providers a great opportunity to applaud CMS’s initial steps in revising the advisory opinion process, but also to urge the agency to embrace broader changes.

CMS’s proposed changes address three substantive areas related to the scope, subject matter, and applicability of advisory opinions, and three areas related to the logistics associated with the CMS advisory opinion process. This alert describes the background of the regulations before discussing the agency’s proposed changes. 

Background

Under Section 1877(g)(6) of the Social Security Act (the “Act”), the Secretary of Health and Human Services (HHS) is directed to issue written advisory opinions concerning whether a referral relating to a designated health service (DHS) other than a clinical laboratory service is prohibited by the Stark Law.  

CMS adopted an advisory opinion process that is very similar to that of the HHS Office of the Inspector General (OIG). Yet there are important differences between the Stark Law, a strict liability statute designed to prevent payment for services where referrals are affected by inherent financial conflicts of interest, and the OIG’s enforcement authorities which include, among others, the Anti-Kickback Statute—a criminal law designed to prosecute knowing and willful acts of fraud and abuse. There are important distinctions between these two laws, and there is no sensible policy rationale for the Stark Law advisory opinion process to be so much more limited than the OIG’s. Further, because the Stark Law is a payment statute, and because qualification for an exception is mandatory, unlike the Anti-Kickback Statute, there has been a significant need for Stark Law guidance through the advisory opinion process. While CMS issues guidance documents in all other aspects of its payment policies through manuals, web postings, and other policy issuances, it has limited non-regulatory guidance for the Stark Law. 

With the long-existing restrictions on the scope and applicability of Stark Law advisory opinions, it is not surprising that CMS received unsolicited comments on the advisory opinion process when the agency published a Request for Information Regarding the Physician Self-Referral Law, 83 Fed. Reg. 29524 (the RFI) in 2018. Although CMS considered these comments to be outside the scope of the RFI, the agency took the opportunity to acknowledge the limitations and restrictions that may be unnecessarily serving as an obstacle to a more robust advisory opinion process, and to address these comments through its annual PFS rulemaking process, where it has proposed and finalized other updates to the Stark Law’s regulations in the past.

Substantive Areas for Comment

1. CMS Still Will Not Accept Advisory Opinion Requests for Hypothetical Fact Patterns 

Many RFI commenters told CMS it should allow advisory opinion requests that involve hypothetical fact patterns and general questions of interpretation, given the strict liability nature and outsized payment penalty risks for violations of the law. Nevertheless, CMS declined to expand the scope of requests that it will consider for an advisory opinion to hypotheticals or general interpretation questions, but is accepting comments to the PFS on whether CMS should propose such an expansion in the future.

It is vital that CMS expand its acceptance of advisory opinion requests for hypothetical situations in order to make meaningful change to this process. Without this allowance, CMS will continue to use this discretion to avoid many advisory opinion requests by asserting that advisory opinion requests are too uncertain or the facts are not developed sufficiently. If CMS is concerned about the volume of requests or the lack of sufficient detail, it can impose meaningful guardrails to allow for only serious and thoughtful advisory opinion requests. And as stated below, adding and enforcing fee requirements for advisory opinions could also serve to encourage only serious advisory opinion requests from parties willing to pay for CMS’s work on them.

In the interim, CMS proposed a minor clarification to 42 C.F.R. § 411.370(b). Namely, that the request for an advisory opinion must “relate to” (rather than “involve”) an existing arrangement or one into which the requestor, in good faith, specifically plans to enter. This expansion is marginally helpful, but standing on its own, this clarification will not be enough to increase the number of advisory opinions. CMS will continue to require requestors to disclose all facts relevant to the arrangement for which an advisory opinion is sought, which specifically includes disclosure of the purpose of the arrangement, the nature of each party’s contribution to the arrangement, the direct/indirect relationships between the parties, and complete copies of all relevant documents that could affect the arrangements, among other information.

2. More Flexibility for CMS to Consider Advisory Opinion Requests for Arrangements Like Those Under Investigation By Other Enforcement Agencies

Currently, 42 C.F.R. § 411.370(e) states that CMS does not accept an advisory opinion request or issue an advisory opinion if: (1) the request is not related to a named individual or entity; (2) CMS is aware that the same or substantially the same course of action is under investigation or is or has been the subject of a proceeding involving HHS or another governmental agency; or (3) CMS believes that it cannot make an informed opinion or could only make an informed opinion after extensive investigation, clinical study, testing, or collateral inquiry.

The proposal adds a basis for CMS to reject a request: when the request does not describe the arrangement at issue with a level of detail sufficient for CMS to issue an opinion, and the requestor does not timely respond to CMS requests for additional information. However, this proposed change is only a codification of one of the reasons CMS already uses to reject advisory opinion requests.

More significantly, the proposal would ease the restriction at 42 C.F.R. § 411.370(e)(2) that prohibits the acceptance of an advisory opinion request or issuance of an advisory opinion if CMS is aware of pending or past investigations or proceedings involving a course of action that is “substantially the same” as the arrangement or proposed arrangement between or among the parties requesting an advisory opinion. The agency proposes to expand its discretion to determine, in consultation with OIG and DOJ, whether acceptance of the advisory opinion request or issuance of the advisory opinion is appropriate. CMS believes that the current regulation is too restrictive and unnecessarily limits CMS’ flexibility to issue timely guidance to requestors engaged in or considering legitimate business arrangements, and specifically seeks comments on this approach.

3. CMS Proposes Expanding the Universe of Who Can Rely on Advisory Opinions

CMS is soliciting comment on proposals to remove some of the regulatory provisions limiting the universe of individuals and entities that can rely on an advisory opinion, and to add language expressing the permissible uses of an advisory opinion. 

CMS has precluded legal reliance on an advisory opinion by a non-requestor third party and has stated that advisory opinions are capable of being misused by persons not a party to the transaction in question in order to inappropriately escape liability, but believes that preclusion may be unduly restrictive in the context of a strict liability payment rule that applies regardless of a party’s intent. CMS expects that parties to an arrangement that is subject to a favorable advisory opinion will rely on the opinion, even if the parties did not join in the request. Accordingly CMS is proposing at 42 C.F.R. § 411.387(a) that an advisory opinion would be binding on the Secretary and that a favorable advisory opinion would preclude the imposition of sanctions under section 1877(g) of the Act with respect to the party or parties requesting the opinion and any individuals or entities that are parties to the specific arrangement with respect to which the advisory opinion is issued.

In addition, CMS is proposing at 42 C.F.R. § 411.387(b) that HHS will not pursue sanctions under section 1877(g) of the Act against any individuals or entities that are parties to an arrangement that CMS determines is indistinguishable in all material aspects from an arrangement that was the subject of the advisory opinion. Even though a favorable advisory opinion with respect to one arrangement would not legally preclude CMS from pursuing violations against parties to a different arrangement, in practice, the agency would not consider using enforcement resources for purposes of imposing sanctions under section 1877(g) of the Act to investigate the actions of parties to an arrangement that CMS believes is materially indistinguishable from an arrangement that has received a favorable advisory opinion. CMS encourages parties to seek an advisory opinion querying whether their arrangement is materially indistinguishable from an arrangement that received a favorable advisory opinion, but is seeking comments on this proposed approach.

Last, CMS is proposing at 42 C.F.R. § 411.387(c) to recognize that individuals and entities may reasonably rely on an advisory opinion as non-binding guidance that illustrates the application of the self-referral law and regulations to specific facts and circumstances.

While the proposals to expand the individuals/entities that can rely on advisory opinions provide  helpful clarifications, because CMS has never imposed sanctions under Section 1877(g) outside of the self-disclosure process, this change is unlikely to have a meaningful impact. Perhaps this restriction would preclude DOJ or a whistleblower from bringing an action predicated on the Stark Law for conduct that is cleared under an advisory opinion. But it is already unlikely that DOJ or a whistleblower would bring an action regarding arrangements similar to those that have received a positive advisory opinion from CMS.

Three Administrative Areas for Comment

1. CMS Commits to Issuing Advisory Opinions Faster, For a Price

CMS seeks comments on the proposed shortening of the existing 90-day timeframe to a 60-day timeframe for issuing advisory opinions, as well as on whether the final rule should include a provision for expedited review, including the parameters for expedited review. Shortening the response timeframe for advisory opinions would align CMS’s advisory opinion process with the OIG’s. The 60-day period would begin on the date that CMS formally accepts a request for an advisory opinion. The 60 days would be tolled during any time periods in which the request is being revised or additional information compiled and presented by the requestor. This change would hopefully spur quicker issuances of advisory opinions, but CMS has not been able to adhere to the existing 90-day time frame. Drafting and issuing advisory opinions are resource intensive endeavors and unless CMS has authority to hire additional staff, this modified timeline by itself may not be enough to speed up the process.

CMS is also seeking comments on a modified fee structure for advisory opinions. At present, 42 C.F.R. § 411.375, imposes an initial fee of $250, and parties are responsible for any additional costs incurred that exceed the initial $250 payment. Following the lead of the OIG advisory opinion process (which charges requesting parties a consolidated final payment based on costs associated with preparing an opinion), CMS is proposing to adopt an hourly fee of $220 for preparation of an advisory opinion, which reflects the costs incurred in processing an advisory opinion request. But CMS is also considering promulgating a cap on the amount of fees charged, and is soliciting comments on the amount of such a cap and potential elimination of the initial $250 fee.

CMS is also considering an expedited pathway for requestors that seek an advisory opinion within 30 days of the request, for which the requester would be charged $440/hour to process the request, reflecting the extra resources necessary to produce an advisory opinion within the abbreviated timeframe. 

In our experience, CMS has not charged for advisory opinions even though there has been an allowance for these charges in the existing regulations. CMS may be anticipating that with increased charges and the collection of fees it may be able to allocate additional resources to increase the speed of the advisory opinion process.

2. CMS Ponders Who, if Anyone, Should Certify the Veracity of Facts in Advisory Opinion Requests

Under current 42 C.F.R. § 411.373(a), the requestor must certify that, to the best of the requestor's knowledge, all of the information provided as part of the request is true and correct and constitutes a complete description of the facts regarding which an advisory opinion is being sought, and 42 C.F.R. § 411.372(b) sets forth the requirements for the signatory if the requestor is a corporation, specifically the Chief Executive Officer or comparable officer. CMS is proposing to revise 42 C.F.R. § 411.372(b)(8) to clarify that the certification must be signed by an officer that is authorized to act on behalf of the requestor. CMS is also considering, and seeks comments regarding, whether it would be appropriate to eliminate the certification requirement given that the United States Code independently prohibits material false statements in matters within the jurisdiction of a federal agency. While the certification requirement has not generally been a barrier to the issuance of advisory opinions, this change would at least theoretically facilitate the process.

3. CMS Considers What Should Prompt the Rescission of an Advisory Opinion

CMS has never rescinded an advisory opinion, but CMS is revisiting whether its authority to rescind or revoke an advisory opinion at 42 C.F.R. § 411.382 reasonably balances the government’s need to ensure that advisory opinions are legally correct and the requestor’s interest in finality. Specifically, CMS is soliciting comments on whether the agency should rescind an advisory opinion only when there is a material regulatory change that impacts the conclusions reached, or when a party seeks reconsideration in light of new facts or law.

Conclusion

CMS’s proposed changes and solicitations for comment in the PFS acknowledge the potential of the advisory opinion process to provide clarity and certainty in navigating the complicated requirements of the Stark Law. In addition to the Stark Law regulatory changes expected this fall as a result of the 2018 RFI, CMS’s proposed actions appear to be a positive step to ease provider burden and increase certainty in the complex world of Stark Law compliance. Hopefully CMS hears from interested providers and physicians through the comment process and issues a final regulation that signals the agency’s willingness to issue meaningful and numerous advisory opinions in the future. If providers and physicians wish to see these changes, we encourage you to submit comments to CMS.