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Stark Law Period of Disallowance

Period of Disallowance Under the Stark Law 

period of disallowanceWhen considering making self disclosure of arrangements under the Stark Law, the concept of “period of disallowance” is of central importance.  The period if disallowance generally refers to the period of timing during which a compensation arrangement is out of compliance with a Stark Law requirement.

To understand this concept, it is important to understand what the Stark Law prohibits.  The Stark Law prohibits an entity, such as a hospital, from billing for certain “designated health services” when a disqualifying compensation arrangement exists between the entity and a physician.  During the period of disallowance, designated health service cannot be billed and are not considered to be an overpayment if billed and received.

When an entity makes a self disclosure, it is essentially admitting that a Stark Law violation took place.  Amounts collected during the period of disallowance must be returned to the government as an overpayment.

CMS regulations define an outside limit for when the period of disallowance can be deemed to have ended.  Different rules apply depending on whether the arrangement involves excess compensation.  For example, on cases involving excess compensation, the period of disallowance can be assured to have ended when the unqualifying arrangement is brought back into compliance and repayment of excess compensation is made.  However, CMS recognizes that every case is different and that there are cases when repayment will never be possible or compliance can never be completely attained.

CMS rules create an “outside time” when the parties can be assured that the period of disallowance will be deemed to have ended.  Each case is judged on its own facts and circumstances and the parties can argue that the period of disallowance has ended before repayment is made.  This permits DHS providers to take advantage of the self disclosure process in cases where they have no legal basis to require the physician to return the excess compensation.

In any event, issues regarding the period if disallowance must be addressed whenever Stark Law self disclosure is being considered by a health care provider.

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John H. Fisher

Health Care Counsel
Ruder Ware, L.L.S.C.
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