In Bad News for Hospital-based CME providers, the Centers for Medicare and Medicaid Services (CMS) did not include a broad exception for CME in the final version of the Stark Law, as the American Medical Association had requested and many CME professionals had hoped.

Phase III Stark regulations, (72 FR 51012; published in the Federal Register on September 5, 2007) went into effect December 4, 2007. Promulgated by CMS, a federal agency within the U.S. Department of Health and Human Services, they apply only to physicians who refer Medicare and Medicaid patients to facilities with which they or a family member have a financial relationship. The law is intended to make sure there's no wrongdoing just by nature of the relationship, e.g., enticing docs to refer more Medicare/ Medicaid patients to a hospital by giving them lots of perks.

Under the Stark Law, CME is considered to be one of those perks for physicians. The only difference regarding CME between the interim Phase II rules, which had been in effect since July 2004, and the final rule, is an exception for compliance training programs that offer CME credit — as long as compliance training predominates. Otherwise, because CME is considered to have value; free or discounted CME constitutes a financial relationship between the hospital and the attending physicians — and could violate the law.

Good News, Sort of

There are two exemptions in the law that can apply to CME under certain circumstances. First, CME could fit under the incidental benefits exclusion that allows an organization to pay for things like parking, cafeteria meals, two-way radios, lab coats, and pagers that are worth less than $29 (2008 rate) per incident (one meal, one day's parking, etc.) and are provided on site. This could cover free CME activities, such as grand rounds offered for medical staff.

The other example is the nonmonetary compensation exclusion, which lets an organization spend up to $338 (2008 rate) per year per physician before getting into trouble. This could apply to free CME activities off-site, for instance in a restaurant or hotel, as well as education offered within the hospital, and could apply to physicians in the wider community, in addition to staff.

In either case, the value of the course would be attributed to the physician participants, if they are not charged. Therefore, the CME provider/hospital must compute the value of the activity. Seth H. Lundy, a partner with international law firm Fulbright & Jaworski LLP, Washington, D.C., who specializes in the Stark Law and other healthcare regulations, says that the value is not necessarily the cost of holding the CME course divided by the number of attendees; rather it's the fair market value of the activity — what the physician attendees would have to pay if they were to attend a similar course through another provider.

The most conservative approach to assessing the value would be to have a qualified third party do the valuation, he says. At the very least, hospitals should do some comparison shopping. “If you did a Google search and came up with 10 or 12 types of similar courses and [their costs], it's at least something to support how the course was valued.” The best comparison, however, would likely be to courses held by CME providers that are not other hospitals or healthcare providers.

Hospitals ought to be able to structure courses to fall within those exceptions, he says. However, since the nonmonetary compensation exclusion is an aggregate annual cap, it will work best for hospitals that don't have other relationships with physicians. “But if you're the type of facility that also may take [a physician] out to dinner from time to time or is in a big city and provides other benefits like basketball tickets, those permitted Stark Law nonmonetary benefits get eaten up very quickly,” he cautions. “Even a $40 or $50 CME course could throw you off.” And hospitals will need to track expenditures per physician — an area in which many organizations are weak, Lundy says.

Many hospitals can offer free or discounted CME because they're covering the costs with pharmaceutical company grants. According to the Accreditation Council for CME's 2006 data report, hospital CME providers earned 52 percent of their income through commercial support. But pharma-funded CME, while not specifically violating Stark, could raise a red flag, as it has the potential to violate the federal anti-kickback statute, says Lundy. (That statute prohibits pharma companies from giving items of value to physicians to induce them to buy its products, if the products are reimbursable by Medicare or Medicaid.)

On the other hand, if the hospital charges for CME and makes money, there should not an issue under the Stark Law, Lundy says. “It would be hard to argue the hospital's giving the physician anything of value if the hospital's actually making a profit.”

A Different Path

To avoid running afoul of the Stark Law, hospitals could follow in the path of pharmaceutical companies and give grants to third-party CME providers to offer educational programs as part of their not-for-profit mission to improve the health and well-being of the community at large, Lundy suggests. If the hospital were not dictating the content or selecting the attendees, there would only be an indirect relationship between the hospital and the attending physicians.

That should relieve the hospital of Stark Law issues related to CME, Lundy says, adding that nonprofit organizations would have to check with their tax advisers before undertaking such an initiative.

Draconian Penalties

With its various permutations and hundreds of pages of accompanying commentary, the Stark Law has been cited by legal experts as one of the most complex rules in healthcare history. But as complicated and frustrating as compliance may be, the penalties for violating the Stark Law are far worse.

If, for example, a CME course worth $50 takes a physician over the nonmonetary compensation limit and the course doesn't meet any other exceptions, that $50 could potentially cost the hospital millions, says Lundy. That's because the physician is then prohibited from making any referrals for designated health services under the Stark Law to the hospital for at least the next year, meaning the hospital cannot bill Medicare or Medicaid for any services resulting from the physician's referrals. Those costs “could be astronomical, plus there are potential fines and penalties,” says Lundy.

While the government has not been particularly focused on enforcement of the Stark Law as a stand-alone issue, instead going after Stark violations as part of other investigations, that's starting to change, says Lundy. “We expect to see more [enforcement] over the next several years,” he says — and that includes a crackdown on CME violations.

In fact, just as the feds have scrutinized pharmaceutical companies' relationships with physicians in past years, they may now widen that focus to include hospitals. CMS is in the process of sending out a survey to approximately 500 hospitals asking about their relationships with doctors, Lundy says. “CMS is not a stranger to the various types of lavish holiday parties and doctor days and gifts to medical staff that go on — and some of those may violate the Stark Law.”

On Call

At press time, we were waiting for comment from the Centers for Medicare and Medicaid Services and additional outside legal experts about how providers can structure CME to comply with Stark. We will offer further analysis in future issues.

If your hospital has developed strategies for compliance with Stark, or you have questions or comments, please e-mail Editor Tamar Hosansky at For more background, visit meetingsnet.comand search for “Stark Raving Mad.”