This is the second installment of a two-part series on the Bipartisan Budget Act. Part I discussed the Bipartisan Budget Act’s effect on Medicare Advantage health plans.

The Bipartisan Budget Act of 2018 (the “Act”), signed into law on February 9, 2018, contains an amendment that should cause physicians and healthcare providers to take note. Section 50404 of the Act, titled “Modernizing the Application of the Stark Rule under Medicare,” codifies recent Centers for Medicare and Medicaid Services (“CMS”) regulations and corresponding preamble that went into effect on January 1, 2016 (“2016 Final Rule”). These new provisions provide greater authority to the Secretary of Health and Human Services to grant waivers or exceptions under the law.


The Stark Law prohibits a physician from referring Medicare patients for certain “designated health services” (“DHS”) to DHS providers if the physician (or an immediate family member) has a direct or indirect financial relationship with the DHS provider, unless one or more exceptions apply to the arrangement. The Stark Law also prohibits DHS providers from submitting claims to Medicare if the service was provided as a result of a prohibited referral.   Additionally, the Stark Law mandates that all entities furnishing services for which payment may be made under Medicare submit information on their reportable financial relationships to CMS or to the OIG.

Over the last few decades, the federal government and many state governments have increasingly scrutinized the financial relationships between health care facilities and physicians who refer patients or business to them.  Such relationships are prone to fraud and abuse because a physician may be more likely to make unnecessary referrals or otherwise over-utilize services if the relationship monetarily incentivizes him or her to do so.  Over-utilization not only results in higher costs to patients and payors, but also may adversely affect patient care.


Previously, arrangements between physicians and providers that were well-structured to comply with the Stark Law’s substantive requirements have nevertheless failed on technicalities—not being written or signed by the parties. With the passing of this Act, Congress aims to ease some of the burdens imposed by these technical requirements and, in turn, lower the instances of over-payments and self-reporting of violations to the government.

Specifically, the Act revised the Stark Law to indicate the following:

  1. The Writing Requirement. The writing requirement of various Stark Law compensation exceptions can be satisfied “by a collection of documents, including contemporaneous documents evidencing the course of conduct between the parties involved.” Previously, CMS had only indicated in a preamble to the 2016 Final Rule that a collection of documents could be relied upon to meet the writing requirement. This was not set forth in regulatory text. Now that this language is in the Stark Law statute, physicians and providers can more comfortably rely on a collection of documents to satisfy the exceptions’ requirements (such as appointment letters, time cards, pay stubs, copies of checks, etc.) to evidence a course of conduct between the parties, rather than formal written contracts.
  2. The Signature Requirement. If parties to an arrangement do not obtain the required signatures before the compensation arrangement is effective, they may do so within 90 consecutive calendar days immediately following the date on which the compensation arrangement became noncompliant (without regard to whether any referrals occur or compensation is paid during such 90-day period) and the compensation arrangement otherwise complies with all criteria of the applicable exception. This 90-day grace period is available for use only once every three years with respect to the same referring physician. This statutory language now aligns with the regulatory language in the 2016 Final Rule.
  3. Holdover Leases for Office Space, Rental of Equipment, and Personal Services Arrangements. Congress additionally offers relief for expired lease and personal services arrangements, providing that they may indefinitely meet the applicable Stark Law exceptions if the immediately preceding arrangement (a) expired after a term of at least one year, (b) met all the requirements of the exception when it expired, (c) continues on the same terms and conditions as the immediately preceding arrangement, and (d) continues to satisfy the conditions of the applicable exception. The corresponding regulatory language was updated in the 2016 Final Rule, which previously only permitted holdovers for up to six months.

Please see Part I of our installment which pertains to Medicare Advantage health plans.