The Phase II interim rules to the decade-old Stark Law that went into effect at the end of July are raising a ruckus in the CME community. The Stark II interim final rule, which was published in the Federal Register in March, was promulgated by the Centers for Medicare and Medicaid Services (CMS), a federal agency within the U.S. Department of Health and Human Services. Stark II applies only to physicians who refer Medicare and Medicaid patients to facilities with which they or a family member have a financial relationship. It's intended to make sure there's no wrongdoing just by nature of the relationship, i.e., enticing docs to refer more Medicare patients to a hospital by giving them lots of goodies.

The main bone of contention is that, unlike the original Stark rule, the preamble to Stark II names CME specifically as one of those goodies, which could put CME providers in the hot seat by targeting CME as having potential for abuse of Medicare and Medicaid. The marrow of that bone, CME providers say, is that it considers CME to be a perk for physicians, similar to a holiday gift basket, instead of a boon for patient care.

The good news is that the CME references are in the preamble to the rule, not in the rule itself, and that the overall intent of the law is actually to make the Medicaid/Medicare system less complicated, not bring in another layer of complexities. The bad news is that the language referencing CME is so vague that CME providers in hospitals, medical centers, and in other organizations that also receive payment for Medicare and Medicaid patients are left scratching their heads trying to figure out what it all might mean for their activities. And the really bad news is what noncompliance might mean for their organizations: Civil penalties are as high as $15,000 per occurrence plus exclusion from the Medicare program. “If you have one doctor in violation who has referred a patient for five different tests, that's five times $15,000 — it adds up to millions very quickly,” says Andrew Wachler of the Royal Oak, Mich., law firm Wachler & Associates, PC.

Can CME Get Out of This?

Since there are about 20 categories of exemption from the law, it seems that CME should fall under at least one of them. Unfortunately, that's where the problem comes in, because the exemptions that may apply to CME create situations that aren't possible to adhere to, given the way CME operates today.

For example, 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 $25 per incident (one meal, one-day's parking, etc.) and provided on site. But, according to the Federal Register, “The free CME could constitute remuneration to the physician, depending on the content of the program and the physician's obligation to acquire CME credits,” which would mean a CME activity wouldn't automatically fall under this exclusion, even if it costs less than $25. According to Karen Ann P. Lloyd, Ice Miller Legal and Business Advisors, Indianapolis, an informal, brown-bag, nonaccredited CME activity with local faculty probably would fall under the incidental benefit exclusion, but it's ambiguous.

Another example, and one that does specifically reference CME in the Stark II preamble, is the nonmonetary compensation exclusion, which lets an organization spend up to $300 per year per physician before getting in trouble. In the preamble, one hospital association commented that some benefits, including “free continuing medical education or other training at the hospital,” can't fit into the $300 exception because it's worth more than $300, or the incidental benefits exclusion because it's worth more than $25 per occurrence. The CMS's response was: “The free CME could constitute remuneration to the physician, depending on the content of the program and the physician's obligation to acquire CME credits.” Which doesn't appear to answer the question.

Even the Lawyers Don't Agree

“Essentially, what they're saying is that CMS may consider CME under the nonmonetary compensation exemption, particularly if physicians need the CME to maintain their license,” says Lloyd. “If you provide Category 1 — accredited CME, you can protect it up to the $300 threshold, then it may become problematic. Nonaccredited CME might fall under the incidental benefits exclusion, but accredited CME is worth more than $25. The problem is, it's also worth more than $300,” which is the total amount allowed per year and includes gifts such as holiday baskets and parties along with CME. She adds, “If you can't fit the value of your CME into the $300-per-year exception, then you have two choices: The doctor can't refer patients to that hospital, or the hospital can accept the referral but can't bill for services provided to patients referred by physicians who attend the CME. What we're telling hospitals is that if you provide CME that's worth more than $300 a year, you better charge physicians fair market value.”

But Jim Miles, Esq., of Miles & Peters, PC, in Denver, disagrees that such measures are necessary. “Most healthcare providers have already approached the topic of CME, kickbacks, and Stark issues,” he says. “The hospitals and CME coordinators I deal with are very careful about treating all physicians equally, and they did away with the boondoggle trips to a conference in Maui for good referral sources years ago, so there's really no basis for kickback accusations.” While he says you have to talk with your in-house lawyers and compliance officers because, at the end of the day, you have to do what they say, “in my opinion, it's OK if you go over the $300 annual limit, as long as you invite all your physicians with privileges equally.”

He also suggests keeping a record of the CME's “value,” which for this purpose just means the honoraria paid divided by the number of docs who were invited to each activity — forget about trying to assess true fair market value. “If the government came knocking at your door — and trust me, they're not going to if it's a legitimate CME activity — you can show that regardless of whether these doctors are good referral sources or not, they all were invited, and you can show the monetary value of the benefit you bestowed.

“I blame my colleagues, the in-house counsel, and compliance officers, for the firestorm,” Miles adds, mentioning a memo from one compliance officer that said not only would the hospital have to charge physicians for CME over the $300 limit, it would also have to tell pharmaceutical companies to cut the check directly to the speaker, which violates Accreditation Council for CME rules and would put their accreditation at risk. “Imagine being the CME provider who got that memo — you'd have to go back to the compliance officer and say, ‘You're nuts.’ My colleagues had a knee-jerk reaction to Stark II, and now we're seeing the fallout from it.”

Looking for Answers

So the CME community continues to struggle to get answers to the myriad questions that the vagueness of the rule's language spawns — such as what exactly providers have to do to comply, and most critically, why CME is being considered a gift in this instance when the point is to improve patient care at the most affordable cost. CMS public affairs deputy director Peter Ashkenaz could only say, in addition to confirming that it might fall under the $300 exception, “We really can't work in hypotheticals — there are so many variations on the facts of the various CME arrangements that it would not be possible [to provide] one-size-fits-all answers.” He adds, “For what it's worth, some of the pharmaceutical-funded CME has anti-kickback statute implications that we addressed in our Compliance Program Guidance for Pharmaceutical Manufacturers. People can use our advisory opinion process to find an answer, but staff is not comfortable in going any further.”

Bruce Bellande, PhD, executive director of the Alliance for CME in Birmingham, Ala., is among those frustrated by the ambiguity of Stark II. “It's extremely vague, and subject to interpretation. Until you have regulatory precedent, what can you do?” The good news, he says, is that the burden of proof lies with CMS, not the CME provider. “They would need hard evidence that a) my institution has documentation of some kind that says CME is there to promote [Medicare] admissions and referrals; b) there was something written or verbal in the content or disseminated by the program that encouraged promoting the institution or encouraged referrals; and c) there was some intent that the CME activity wouldn't meet the test of improving quality of care at the most reasonable cost to the patient or the payer. If these elements do not exist, CME is actually saving the government money, not providing opportunities for kickbacks.”

If your hospital is the only place in the area that offers high-tech, expensive equipment such as gamma knives, and your physicians speak about the technology at CME activities, it would be prudent to make sure they know where to draw the line so as not to appear to be soliciting referrals for procedures that use that equipment, he adds. “You're in a precarious situation if you're the only game in town, because it's in your best interest financially to keep that machine working 80 percent of the time, or 100 percent.”

Other prudent measures, lacking more specific regulatory guidance, says Bellande, might be to make sure the CME is free of any relationship to the marketing of the institution, including admissions and referrals, and to make faculty acutely aware of the provisions of Stark II, along with ACCME and OIG rules.

Again, attorney Miles emphasizes that the chances of the feds busting your program for going over $300 in a year are slim to none. “I deal with these prosecutors all the time, and they go after the obvious targets. Can you imagine having to try to prosecute a CME program for going over $300 when they treated all the doctors equally and they have documented the value of the CME the physicians could have received if they attended all the programs? You're going to make a case that a hospital is doing something improper by educating its physicians on how to promote better quality care? It would be ludicrous.”

While at this point, most CME providers have more questions than answers, the Alliance for CME is working on putting together some guidance that will help its members comply with this latest rule — as soon as it can get some solid information. “Right now, all we have are vague comments and highly subjective interpretation,” says Bellande. “Hospital attorneys are going to keep pushing until they know what this language means; they're going to force the regulators to do some regulatory clarification. We're gathering data and hoping to acquire some kind of definitive interpretation we can base guidance on, instead of relying on your opinion or mine.”

Adds Miles, “I'm sure this will end up being a good outcome. But those wheels turn slowly and, in the interim, I don't think people need to worry about this.” Unless, of course, your compliance officer has already sent the memo saying that you must keep CME under $300 per year or charge “fair market value” for each activity over the limit.

As Bellande says, “This is definitely a moving target.”

Editor's note: For more on what you can do about Stark II, turn to page 22.