News & Insights


July 19, 2021

Health Headlines – July 19, 2021

CMS Proposes Changes to Stark Law Rules for Indirect Compensation Arrangements – On July 13, 2021, CMS published a proposed rule (the Proposed Rule) that would amend certain regulations under the Stark Law relating to indirect compensation arrangements. CMS recently addressed indirect compensation arrangements in December 2020 when it made revisions to the regulatory definition which narrowed the scope of arrangements that are subject to scrutiny. The Proposed Rule would effectively roll back these changes for indirect arrangements in which the physician’s direct compensation involves compensation for anything other than services which are personally performed by the physician.  Comments on the Proposed Rule are due no later than 5 p.m. on September 13, 2021.
The Stark Law generally prohibits a physician from making referrals for certain designated health services (DHS) to an entity with which the physician has a direct or indirect compensation arrangement, unless the arrangement qualifies for an exception. The current regulatory definition at 42 C.F.R. §411.354(c)(2) provides that an “indirect compensation arrangement” exists when:

  • there is an unbroken chain of persons or entities between the physician (or the physician’s immediate family member) and the entity furnishing DHS having financial relationships between them;

  • the physician receives aggregate compensation from the entity with which the physician (or immediate family member) has a direct relationship which varies with the volume or value of referrals or other business generated; and

  • the individual unit of compensation to the physician either (i) is not fair market value or (ii) includes the physician’s referrals or other business generated as a variable.

This definition was implemented pursuant to a final rule published in December 2020.

The Proposed Rule would make two principal changes.  First, the regulatory definition of “indirect compensation arrangement” would be revised to include any unbroken chain of financial relationships in which the compensation arrangement closest to the physician (or immediate family member) involves compensation for anything other than services that are personally performed by the physician (or immediate family member).  Second, the term “unit” would be defined as either (a) the specific service, where the compensation is based solely on the service provided, or (b) time, where the compensation is based solely on the period of time during which services are provided or where the compensation is not otherwise based on the service provided.

These changes would diminish the impact of the December 2020 amendments and cause arrangements that were shielded under the current definition to become subject to scrutiny once again.  The preamble to the Proposed Rule explains that these changes are necessary because CMS “inadvertently excluded from the definition of ‘indirect compensation arrangement’ a subset of . . . compensation arrangements that [CMS has] long identified as presenting significant program integrity concerns: certain arrangements involving unit of service-based payment for the rental of office space or equipment[,]”—although, as noted above, CMS went well beyond this concern to sweep in any arrangement involving compensation for anything other than services that are personally performed by the physician (or immediate family member).

In addition to the changes relating to indirect compensation arrangements, CMS is also proposing to amend the Stark Law exception at 42 C.F.R. §411.355(h) for preventive screening tests, immunizations, and vaccines to allow referrals for COVID-19 vaccines to qualify for the exception in some circumstances. The exception currently requires, among other things, that a covered vaccination must be subject to CMS-mandated frequency limits, but CMS has not yet mandated any frequency limits for COVID-19 vaccines. The Proposed Rule would modify §411.355(h) to provide that COVID-19 vaccines are covered by the exception, even though CMS has not yet prescribed frequency limits, provided that all other requirements of the exception are met. The preamble indicates that this change is intended to prevent the Stark Law regulations from impeding the availability of COVID-19 vaccines.

The Proposed Rule is expected to be published in the Federal Register on July 23, 2021.  Please click here for a display copy of the Proposed Rule.  The proposed Stark regulation changes are found at pp. 611-634.  
Reporter, J. Gardner Armsby, Atlanta, +1 404 572 2760,

CMS Issues CY 2022 Physician Fee Schedule Proposed Rule On July 13, 2021, CMS released the Calendar Year (CY) 2022 Physician Fee Schedule (PFS) proposed rule (the Proposed Rule). The Proposed Rule includes proposed policy changes for Medicare payments under the Physician Fee Schedule and other Medicare Part B issues for claims occurring on or after January 1, 2022. The Proposed Rule changes aim to address the widening gap in health equity that has particularly affected underserved populations and has been recently highlighted by the COVID-19 public health emergency (PHE). Comments to the Proposed Rule are due by 5:00 p.m. on September 13, 2021.

Some of the proposed changes are highlighted below.

  • CY 2022 PFS Rate-setting and Conversion Factor. CMS is proposing that the CY 2022 PFS conversion factor be $33.58, a decrease of $1.31 from the CY 2021 PFS conversion factor. This proposed amount reflects the expiration of the 3.75 percent payment increase provided for CY 2021 by the 2021 Consolidated Appropriations Act, the 0.0 percent statutory update, and the adjustment necessary to account for changes in the RVUs and expenditures resulting from the policies proposed in the Rule.

  • Appropriate Use Criteria. CMS is proposing to delay the payment penalty phase of the Appropriate Use Criteria program to the later of January 1, 2023 or the January 1 that follows the declared end of the COVID-19 PHE.

  • Evaluation and Management (E/M) Visits. CMS is conducting ongoing reviews of payment for E/M visit code sets over the course of several years of PFS rules.  In this rule, CMS is proposing changes in light of the recent changes to the E/M visit codes in the AMA CPT Codebook, effective January 1, 2021, and recent withdrawals of manual provisions. CMS is also proposing a number of refinements to policies for split or shared E/M visits to better account for services provided by a physician and non-physician practitioners in the same group, critical care services, and services furnished by teaching physicians involving residents.

  • Exceptions to Electronic Prescribing of Controlled Substances Requirement. CMS is proposing the second phase of implementing regulations for Section 2003 of the SUPPORT Act which requires electronic prescribing of controlled substances for schedule II, III, IV, and V controlled substances covered through Medicare Part D. CMS is proposing exceptions where the prescriber and dispensing pharmacy are the same entity, for prescribers who issue 100 or fewer controlled substance prescriptions for Part D drugs per calendar year, and for prescribers who are in the geographic area of a natural disaster, or who are granted a waiver based on extraordinary circumstances, such as an influx of patients due to a pandemic.  CMS has proposed to push the start date for compliance actions back one year to January 1, 2023, and to push compliance actions for prescriptions written for beneficiaries in long-term care facilities to January 1, 2025.

  • Behavioral Telehealth Expansion. CMS is proposing extensions of temporary coverage of telehealth services on a Category 3 basis until the end of CY 2023 and is making permanent coverage and payment for some telehealth services. Specifically, CMS is focusing on expanding access to behavioral health care by removing geographic location restrictions that were previously a potential barrier to accessing telehealth services for mental health treatment. CMS is proposing to permanently allow RHCs and FQHCs to report and receive payment for mental health services delivered via telehealth in the same way they currently do for in-person visits.  The Proposed Rule allows the use of audio-only visits to increase access to patients who live in areas with limited internet access, or patients who are unable or unwilling to use two-way audio-visual devices for their health care visits. 

  • Health Equity Data Collection. CMS is soliciting feedback to improve the collection of data through confidential reports to measure health disparities across its programs and policies. The data points of interest include LGBTQ+, race and ethnicity, dual-eligible beneficiaries, disability, and rural populations. Through comprehensive data collection and analysis, CMS aims to identify opportunities and develop strategies to close the health equity gap.

  • Vaccine Payment Rate Updates. CMS is soliciting feedback on updated payment rates for preventive vaccines covered under Medicare Part B, and its recently adopted $35 payment add-on for immunizers who vaccinate underserved patients in their home. CMS is also soliciting feedback on whether COVID-19 monoclonal antibody products used as vaccines should be treated as vaccines or treated like other monoclonal antibody products after the COVID-19 PHE.

  • Medicare Shared Savings Program (MSSP) Changes. CMS is proposing a number of changes to the MSSP program, including a longer phase-in of the reporting requirements of quality measure sets, modifying the repayment mechanism thresholds, streamlining the MSSP application process, and revising the definition of primary care services that is used for beneficiary assignment.

  • Quality Payment Program Changes. CMS is proposing changes to its Quality Payment Program by requiring clinicians to meet higher standards to be eligible for incentives and proposing Merit-based Incentive Payment Value Pathways in seven clinical areas: rheumatology, stroke care and prevention, heart disease, chronic disease management, lower extremity joint repair, emergency medicine, and anesthesia. CMS is also proposing to include clinical social workers and certified nurse-midwives in the definition of “eligible clinician” and to authorize physician assistants to bill Medicare directly for their professional services.

  • Colorectal Screening Services Coinsurance Decrease. CMS is proposing to implement a recent statutory change to phase out coinsurance for additional services stemming from colorectal screening tests. Under CMS’s proposed change, the amount of coinsurance for these additional services would be reduced over time, beginning January 1, 2022, with the goal of reducing coinsurance payments down to zero by January 1, 2030.

The Physician Fee Schedule Proposed Rule can be found here, and the CMS fact sheet on the Physician Fee Schedule Proposed Rule can be found here.
Reporter, Jasmine Becerra, Atlanta, +1 404 572 3537,

HHS Releases New Frequently Asked Questions Regarding CARES Act Provider Relief Funds – Last week, HHS released five new Frequently Asked Questions (FAQs) regarding payments distributed to providers via the CARES Act Provider Relief Fund.  The FAQs cover a wide range of topics, including how to return unused funds partially spent, reporting contractual adjustments and charity care adjustments, appealing or disputing a decision made, and more.

The new FAQs broadly discuss the following general categories: (1) general information; (2) auditing and reporting requirements; (3) calculating eligible expenses and lost revenues; and (4) appeals.  Notably, the FAQs explain that Providers that have remaining Provider Relief Fund payments that they cannot expend on allowable expenses or lost revenues attributable to COVID-19 by the relevant deadline are required to return the funds to HHS.  Instructions to return funds are available here.  Additionally, the FAQs explain that providers should exclude the amount of contractual adjustments from all third-party payers and charity care adjustments, as applicable, when determining patient care-related revenue sources.

The FAQs also describe a potential opportunity to appeal HHS’s payment decisions.  The FAQs explain that HHS recognizes that providers may have questions regarding the accuracy of their PRF payments.  HHS is developing a structured reconsiderations process to review and reconsider payment accuracy based on submitted supporting documentation.  HHS will provide details regarding this process in the coming weeks.

The complete FAQ document is available here.

Reporter, Ahsin Azim, Washington, D.C., +1 202 626 9262, 

OIG Posts Healthcare Fraud and Abuse Control Program Fiscal Year 2020 Report -- Last week, the Department of Justice (DOJ) and HHS OIG published its annual report of revenues and expenditures under the Healthcare Fraud and Abuse Control Program, detailing the amounts deposited and appropriated to the Medicare Trust Fund and the source of such deposits.

HIPAA established a national Healthcare Fraud and Abuse Control Program designed to coordinate federal, state, and local law enforcement activities with respect to healthcare fraud and abuse.  Each year, the DOJ and HHS are required to publish an annual report detailing expenditures and revenues for the prior fiscal year.  Last week, the DOJ and HHS published this report for fiscal year 2020, the 24th year of operation of the program.  Below are some take-aways from the report.

During fiscal year 2020, the federal government won or negotiated $1.8 billion in healthcare fraud judgments and settlements.  This amount, coupled with recoveries from prior years, resulted in $3.1 billion being returned to the federal government or paid to private persons in 2020.  Over $2 billion of this $3.1 billion was transferred to Medicare Trust Funds (the collective term for the Medicare Part A and Medicare Part B Trust Funds).  In addition, approximately $128.2 million in federal Medicaid money was transferred to the Treasury. 

With respect to enforcement actions, the DOJ opened 1,148 new criminal healthcare fraud investigations in fiscal year 2020.  Of these, federal prosecutors filed charges in 412 cases involving 679 defendants, and 440 defendants were convicted of healthcare fraud-related crimes.  Additionally, the DOJ opened 1,079 new civil healthcare fraud investigations and had 1,498 civil healthcare fraud matters pending by the end of fiscal year 2020.  With the help of the FBI, over 407 operational disruptions of criminal fraud organizations occurred, as well as the dismantling of the criminal hierarchy of more than 101 healthcare fraud criminal enterprises.

HHS OIG conducted investigations as well, resulting in 578 criminal actions against individuals or entities engaging in Medicare or Medicaid crimes.  Further, 781 civil actions were filed in court, including false claim allegations and unjust-enrichment lawsuits.  HHS OIG also excluded 2,148 individuals and entities from Medicare, Medicaid and other federal healthcare programs because of various criminal convictions including some related to Medicare, Medicaid, patient abuse/neglect, or licensure revocations. 

The annual report also detailed expenditures.  The DOJ and HHS certified $308.7 million in mandatory funding.  Additionally, Congress appropriated $786 million in discretionary funding.  Some of the allocations included roughly $319 million to OIG, roughly $62 million to the United States Attorneys, and roughly $592 million to CMS.  The rest of the allocations are detailed in the report.

A copy of the report is available here.
Reporter, Dominic J. Nunneri, Los Angeles, +1 213 443 4329,

Also in The News

King & Spalding Webinar - What Providers Need to Know About the No Surprises Act Interim Final Rules Issued on July 1, 2021

On Tuesday, July 20, 2021, at 12:30 P.M. Eastern, King & Spalding will be hosting a one-hour roundtable webinar to discuss the regulations issued by CMS on July 1, 2021, regarding the implementation of the new federal No Surprises Act. The webinar will discuss what providers need to know in deciphering the new interim rules, including how CMS will determine the qualifying payment amount under the Act, and how that determination will affect providers’ financial relationships with both patients and payers. Presenters will also discuss the notice and consent requirements under the interim rule and the particular areas on which CMS has requested comments. Finally, presenters will discuss the provider coalition that King & Spalding is forming to address the No Surprises Act and ensuing regulations. King & Spalding presenters include healthcare regulatory and litigation experts John Barnes, Amanda Hayes-Kibreab, Joel McElvain and Glenn Solomon. You can register for the webinar here

 King & Spalding Webinar - COVID-19 Litigation and the PREP Act: A Year Later

King & Spalding will host a webinar on July 28, 2021 from 12 p.m. to 1 p.m. ET. This Life Sciences and Healthcare Roundtable webinar will discuss the status of lawsuits against healthcare providers and pharmaceutical and medical device companies involved in responding to the public health emergency posed by the COVID-19 pandemic. Several hundred cases have already been filed against providers, including owners and operators of senior care and other long-term care facilities. Future lawsuits against pharmaceutical and medical device companies involved in the manufacture and distribution of COVID-related medications and devices under Emergency Use Authorization are expected. This webinar will focus on, among other topics, the state of this litigation, lessons learned so far, and the application of the federal Public Readiness and Emergency Preparedness Act of 2005 (the PREP Act) to these lawsuits. The PREP Act immunizes from suit and liability entities involved in the manufacture, testing, development, distribution, administration and use of COVID-19 countermeasures. You can obtain more information and register for the webinar here.

SAVE THE DATE: King & Spalding 30th Annual Health Law & Policy Forum

On Monday, September 20, 2021, from 8:00 am to 5:00 pm, King & Spalding LLP will host the 30th Annual Health Law & Policy Forum at The St. Regis Atlanta.  The Health Law & Policy Forum will focus on the foremost legal and political developments impacting the healthcare industry.  Further details and registration will be available soon, and capacity will be limited. 

Editors: Chris Kenny and Kate Stern

Issue Editors: Michelle Huntsman and Lauren Gennett.