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Temporary Non-Compliance With The Stark Law

Stark Law Temporary Non Compliance – Is There Any Wiggle Room?

Stark Law Temporary Non ComplianceOne issue that has raised concerns of providers when complying with the Stark anti-referral laws is what to do when a financial arrangement temporarily fails to comply even though it was originally structured to comply with Stark.  The Stark Regulations provide for a little wiggle room for arrangements that temporarily fall out of compliance. The relevant exception applies to referral arrangements that fall out of compliance temporarily for reasons that are beyond the control of the provider.

The temporary non-compliance exception only applies to arrangements that have historically complied with an  exception from Stark fora period of at least 180 days before the arrangement falls out of compliance. The exception then gives a provider a window period of 90 days to either correct the temporarily non-complying financial arrangement to bring it back into compliance or to terminate the non-complying referral relationship.

This exception brings to light the importance of continuing to monitor financial arrangements that could implicate the Stark Law to assure continued compliance. It is not enough to originally structure arelationship to comply with Stark and then forget about the ongoing arrangement. Changing circumstances could lead to future non-compliance.  Adverse consequences can be avoided if proper monitoring is in place and proactive steps are taken to correct any non-compliance issues.

If a review indicates that an arrangement has fallen out of compliance with the Stark Law, the provider should fully document the nature of the non-compliance and the reasons that the temporary non-compliance occurred. The documentation should include whatever evidence exists that the reason for the non-compliance was beyond the provider’s control.

In addition to documenting the reasons for the non-compliance, the provider should also immediately take steps to remedy the situation. The temporary non-compliance exception creates a narrow 90 day remedial time period. However, this 90 day window can actually be quite short. The exception provides that the 90 day remedial period begins to run on the date that the arrangement falls out of compliance; not the date that the provider discovers the non-compliance. Depending on the diligence of the provider in discovering the non-compliance, the time period to take remedial action may be substantially less than 90 days.

The temporary non-compliance exception can only be used once every 3 years with respect to the same referring provider. The exception is not available if the non-compliance places the arrangement in violation of the Anti-Kickback Statute.

It should also be noted that the exception does not apply to violations of the non-monetary limit on incidental medical staff benefits. Violaters of the non-monetary cap must bring the arrangment into compliance for subsequent years but cannot remedy past violations.

The biggest lesson to take from this exception is the need for providers to establish a systematic program for continual monitoring of financial relationships with referring providers.

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John H. Fisher

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