On November 15, 2016, as part of its 2017 Medicare Physician Fee Schedule update, the Center for Medicare and Medicaid Services (CMS) reissued its prohibition on certain unit-based rental arrangements with referring physicians, adopted updates to the list of CPT/HCPCS codes (Code List) defining certain of the Stark Law’s designated health services (DHS) and implemented a minor technical change to its instructions for submitting a request for an Stark advisory opinion. These revisions can be found at 81 Fed. Reg. 80170, 80524-36.
Per-Click Arrangements
CMS reissued Stark regulatory text, effective January 1, 2017, prohibiting the use of per unit of service rental rates (commonly referred to as “per-click” fees in the equipment lease context) when the aggregate rent (or volume of units) paid reflects the volume of services furnished to patients referred by the lessor to the lessee. This prohibition had been struck down by the US Court of Appeals for the District of Columbia Circuit as applied to equipment rental arrangements in Council for Urological Interests v. Burwell, 790 F.3d 212 (D.C. Cir. 2015). The court struck down the prohibition under the two-step test from Chevron U.S.A. v. Natural Resources Defense Council, 467 U.S. 837 (1984) (Chevron) because of CMS’s stated rationale for imposing the prohibition, not because it did not believe CMS had the authority to impose it. The reissued regulatory text is located in the Stark Law exceptions for the rental of office space and equipment and the fair market value and indirect compensation exceptions (42 C.F.R. § 411.357(a), (b), (l) and (p)). As found in the Stark indirect compensation exception, the text is as follows:
Compensation for the rental of office space or equipment may not be determined using a formula based on—
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(B) Per-unit of service rental charges, to the extent that such charges reflect services provided to patients referred by the lessor to the lessee.
This regulatory text was originally added by amendments to the Stark regulations, effective October 1, 2009. In Council for Urological Interests, the DC Circuit struck down CMS’s prohibition because the restriction was based, in part, on CMS’s flawed interpretation of a 1993 House Conference Committee report (the Conference Report). (For a full discussion of the case, see article.) The Conference Report stated that “[t]he conferees intend that charges for space and equipment leases may be...
