New Timeshare Arrangement Exception under Stark Law

Centers for Medicare & Medicaid Services (CMS) added a new exception to the Stark Law regarding rental of office space known as, Timeshare Arrangements, which enables the use of another person or entity’s premises, equipment, personnel, items, supplies or services by physicians who, for various legitimate reasons, do not require or are not interested in a traditional office space lease arrangement.2 3 4 5  This allows visiting physicians to consult patients without requiring the leasing physician to transfer control.6 The new exception ensures that there is adequate access to specialty care in rural and underserved areas.

Conditions that Apply to Timeshare Arrangements

       Timeshare Arrangement exceptions are applied when the following conditions are met:

  • The arrangement is well documented (written and signed) by both parties and specifies the premises, equipment, personnel, items, supplies, and services covered by the arrangement;
  • The arrangement is between a physician or a physician organization (licensors) and a hospital or a physician organization (licensee);
  • The arrangement must be used predominantly for providing evaluation and management services of the licensee’s patients;
  • The equipment covered by the arrangement should be located in the same building where the evaluation and management services are furnished (does not apply to advanced imaging equipment, radiation therapy equipment, or clinical or pathology laboratory equipment);
  • The arrangement is commercially reasonable;
  • The arrangement is set in advance, consistent with fair market value (“FMVM”), and does not take into account the volume or value of referrals;
  • The arrangement does not violate the Anti-Kickback statute (AKS) or any other Federal or State laws;
  • The arrangement prohibits percentage of revenue formulas and per-unit service fees that are not time-based.

                            Regulatory Statutes that apply to Timeshare Arrangements

       The Stark Law prohibits a physician from referring a patient on a federal program (Medicare/Medicaid) to other healthcare services, such as clinical laboratory services, medical equipment and supplies, and outpatient prescription drugs, with which the physician has a financial relationship. The Stark Law requires that healthcare transactions must be at FMV, as a violation of Stark Law can lead to penalties and a healthcare system’s exclusion from participation in federal health programs. Most Stark Law exceptions cannot take into account the volume or value of patient referrals.6        

       The AKS is a criminal law that prohibits anyone from knowingly and willfully paying any remuneration to induce patient referrals or to generate business involving any service payable by the federal healthcare programs. Penalties for violating the AKS include fines, jail terms, and exclusion from participation in the federal healthcare programs.

Why was it implemented?

       CMS finalized these changes to the Stark Law to –

  • Reduce the burden on healthcare providers and facilitate compliance with regulations;
  • Improve access to healthcare services, especially in underserved areas, by allowing physicians to practice in communities where there is a need for specialists and part-time physicians, without requiring them to sign office space lease agreement;7
  • Add flexibility to healthcare providers and ensure that it does not pose any risk to the patients.6

Conclusion

       Many hospitals and physicians found it burdensome to comply with the “Rental of Office Space Exception” prior to the implementation of the Timeshare Arrangement.6 This Stark exception creates an opportunity for physicians to share office space, equipment, and personnel without violating the regulatory statutes.

1.
M. R, M. P. CMS finalizes new timeshare exception to the Stark law – Healthcare Law Insights. Healthcare Law Insights. http://www.healthcarelawinsights.com/2015/11/cms-finalizes-new-timeshare-exception-to-the-stark-law/. Published November 18, 2015. Accessed September 28, 2016.
2.
M. S. Analysis of New Timeshare Arrangement Exception to Stark Law – Part 1 . The National Law Review. http://www.natlawreview.com/article/analysis-new-timeshare-arrangement-exception-to-stark-law-part-1. Published March 2016. Accessed September 28, 2016.
3.
P. SI, N. M. CMS Releases New Stark Exceptions for Timeshare Arrangements and  Assistance to Recruit Non-Physician Practitioners. Birmingham Medical News. http://birminghammedicalnews.com/news.php?viewStory=2286. Published May 12, 2016. Accessed September 28, 2016.
4.
Changes to the Stark Law: Part II. Thompson Hine LLP. http://www.thompsonhine.com/publications/changes-to-the-stark-law-part-ii. Published February 2016. Accessed September 28, 2016.
5.
Physician Timeshare Arrangements: New Stark Option for Sharing Space with Visiting Specialists and Others | Holland & Hart LLP . hollandhart.com. https://www.hollandhart.com/physician-timeshare-arrangements-new-stark-option. Published December 2015. Accessed September 28, 2016.
6.
R. F, C. J, G. W. CMS finalizes significant Stark Law rulemaking. Dentons.com. http://www.dentons.com/en/insights/alerts/2015/november/3/cms-finalizes-significant-stark-law-rulemaking. Published November 2015. Accessed September 28, 2016.
7.
K. C. New Rules on Timeshare Arrangements. Centolella. http://www.centolellalaw.com/new-rules-on-timeshare-arrangements/. Published November 30, 2015. Accessed September 28, 2016.