Dorsey Health Law

The Centers for Medicare & Medicaid Services (“CMS”) released Advisory Opinion No. CMS-AO-2021-01 in June 2021, which gave the requestor the green light to provide designated health services (“DHS”) through wholly-owned subsidiaries while the parent and subsidiaries could qualify as a “single legal entity” under the “group practice” definition of the federal physician self-referral law (or “Stark Law”). As a result, the requestor is eligible for the in-office ancillary services (“IOAS”) exception to the Stark Law. This opinion is notable because CMS issues advisory opinions infrequently and, particularly given recent changes to the CMS advisory opinion regulations (as we wrote about here), other entities may use this opinion as guidance in forming similar arrangements. As background, under the IOAS exception, a physician practice may make referrals for DHS within the practice, but only if it qualifies as a group practice.  The term “group practice,” defined in the Stark regulations, requires, among other things, that the practice is a “single legal entity” that operates “primarily for the purpose of being a physician group practice.”  Accordingly, a “single legal entity” does not include physicians who are only informally affiliated for the purpose of sharing profits from referrals, but a single legal entity may itself own subsidiary entities.  The recent advisory opinion focuses on whether a physician practice with wholly-owned subsidiary physician practices qualifies as a “single legal entity” for the purposes of the IOAS exception. The Advisory Opinion In short, the advisory opinion allows for a group practice with wholly-owned subsidiaries to provide services through those subsidiaries, even if the subsidiaries do not themselves qualify as group practice. The group practice and the subsidiaries, for purposes of the IOAS exception, qualify as a single legal entity. The Arrangement The requestor (“Group Practice”), was the sole owner of two subsidiary physician practices (the “Subsidiaries”). Group Practice was looking to provide services, including DHS, to patients, both directly and through the Subsidiaries. Group Practice attested that, while the Subsidiaries would retain their own Medicare enrollment and use billing numbers assigned to them to bill Medicare for items and services they furnish to beneficiaries, the material assets and business functions of the Subsidiaries would be transferred to Group Practice or the practice’s management company. The management company would provide non-clinical services to both Group Practice and the Subsidiaries. The revenue and expenses of the Subsidiaries would be attributed to Group Practice. Furthermore, the clinical employees and contractors of the Subsidiaries would become employees and contractors of Group Practice, and the patients served by the Subsidiaries would be considered patients of Group Practice. Group Practice certified that it met all requirements of a group practice itself and that the arrangement with the Subsidiaries would meet all other requirements of a group practice, such as having centralized decision-making. The Subsidiaries did not qualify as group practices on their own, and Group Practice specifically sought to determine if it, in its arrangement with the Subsidiaries, could qualify as a “single legal entity” for the purposes of the group practice definition, thus meeting this requirement of the IOAS exception. CMS Analysis CMS found that Group Practice and the Subsidiaries would qualify as a single legal entity. In concluding this, CMS focused heavily on two aspects of the relationship: (1) the revenue and expenses of the Subsidiaries would be attributed to Group Practice, and (2) the clinical employees and contractors of the Subsidiaries would become employees and contractors of Group Practice. CMS found the first factor to be adequate even though the Subsidiaries maintained their own Medicare enrollments and payor contracts separate from Group Practice. What This Means for Physician Practices Reliance on Advisory Opinions On January 1, 2020, the Stark regulations regarding advisory opinions were revised.  Prior to this revision, only the entity requesting the advisory opinion and others who were parties to the specific arrangement could rely on the opinion.  Under the revised advisory opinion regulations, the Secretary of HHS will not pursue sanctions against other entities who did not make the request for the opinion and who are not parties to the specific arrangement, as long as their arrangement is ”indistinguishable in all its material aspects” from an arrangement which received a favorable advisory opinion from CMS.  See our detailed analysis of the revised advisory opinion regulations here. This means that other physician practices outside of Group Practice and the Subsidiaries can make referrals to wholly-owned subsidiaries if such arrangements are indistinguishable in all material aspects from the one described in the opinion and otherwise meet the requirements of the group practice definition and IOAS exception.  Below is a brief list and description of factors that would likely be considered material to this arrangement, and thus necessary for physician practices seeking to rely on Advisory Opinion No. CMS-AO-2021-01. Referrals to Subsidiaries Parent-Subsidiary Relationship The parent-subsidiary relationship is a key factor in the “single legal entity” analysis. As stated above, physicians that are only informally affiliated do not qualify as a group practice. Further, the advisory opinion expressly states that Group Practice and the Subsidiaries qualify as a single legal entity “provided that [Group Practice] is the sole owner of the Subsidiaries.” However, it is not necessary for the subsidiary physician practice itself to qualify as a group practice. Below are two diagrams: Diagram 1 illustrates affiliated entities that do not qualify as a group practice, and Diagram 2 illustrates the parent-subsidiary relationship that CMS deemed appropriate in the advisory opinion. Revenue and Expenses Attributed to Parent Given the emphasis CMS put on the framework of Group Practice and the Subsidiaries’ revenue and expenses, this element would likely be considered material. Therefore, subsidiary revenue and expenses should be attributed to the group practice if the entities are looking to qualify as a single legal entity. However, as mentioned above, it is not necessary for a subsidiary physician practice to bill Medicare under the parent. A subsidiary may have its own Medicare number and bill separately from the parent, as long as the revenue and expenses of the subsidiary are ultimately attributed to the parent. Employees and Contractors are Those of the Parent Similarly, if a subsidiary’s employees and/or contractors are not considered to be the employees and/or contractors of the group practice, it is unlikely that the arrangement would fall within the exception, because this, too, was a focus of the opinion and thus is likely material from CMS’s point of view. Conclusion Following issuance of Advisory Opinion No. CMS-AO-2021-01 and recent regulatory changes regarding reliance on advisory opinions, parent physician practices may make referrals for DHS to wholly-owned subsidiary practices as a single legal entity if all other elements of the group practice definition and IOAS exception are met. This advisory opinion only addresses the definition of a single legal entity. Entities must ensure that the other elements of the group practice definition and IOAS exception to the Stark Law are also met if they choose to form a parent/subsidiary referral relationship. Please contact the authors or your regular Dorsey attorney with any questions. Summer Associate Hannah McCallum provided substantial assistance in the drafting of this article.    

The COVID-19 pandemic required health care providers of all sizes to make drastic changes to the mode of patient care delivery. Telehealth quickly emerged as a safe alternative to in-person patient visits, and many providers quickly transitioned to virtual services. The pandemic-initiated expansion of telehealth was rapid and significant, but the pandemic likely accelerated existing trends more than creating new ones. The increased availability of telehealth has offered patients greater access levels and types of care that would otherwise be difficult to obtain due to geography, limited appointment availability, or affordability. Despite the increased access to care and positive experiences with telehealth over the past year and a half, many regulatory actions temporarily enabling the use of telehealth services have expired or will end in the coming months. What does the post-COVID future hold for tele health? Health care industry leaders are tracking the following developments: Licensing State professional licensure laws are major obstacles for telehealth providers wanting to offer telehealth services as an option for patients who reside or are otherwise located in other states. State laws governing the practice of medicine, nursing, social work, and other health professions generally require the provider furnishing care to be licensed in the state where the patient is located. At the beginning of the pandemic, the spike in demand for virtual care led states to quickly take action to loosen or waive professional licensure requirements. Many states allowed out-of-state health care providers of all types to provide telehealth services to their residents, including Hawaii, Idaho, and Vermont. States such as Illinois and Maryland permitted telehealth practice only where a provider had a pre-existing relationship with the patient, and others only relaxed requirements for physicians or mental health providers, such as in Minnesota. Post-pandemic, we expect to see continued efforts to remove licensing barriers faced by telehealth providers. Several states have enacted the Interstate Medical Licensure Compact or have entered into cross-border licensure waiver agreements with neighboring states, but these waiver agreements may only apply to certain practitioners or involve slow, costly application processes. Some states may follow the approach taken in Florida and Georgia, where health care providers can obtain a “telemedicine license” with less burdensome requirements. Action on the federal level is also possible. In response to COVID-19, the Centers for Medicare & Medicaid Services (“CMS”) temporarily waived the Medicare requirement that providers be licensed in the state they are delivering telemedicine services when practicing across state lines, subject to certain conditions. While this waiver does not exempt providers from licensure requirements under state law, subsequent action taken at the federal level may set a trend followed by state governments. Providers should also be aware of existing state laws permitting the practice of telehealth across state lines when an existing patient is on vacation or attending college in another state. For example, in Minnesota, out-of-state physicians are exempt from licensure requirements if only providing telehealth services on an “irregular or infrequent basis” as defined in Minn. Stat. § 147.032. And Colorado allows non-Colorado-licensed health care providers to provide occasional services or consultation via telehealth to patients in Colorado as long as they meet certain requirements, such as maintaining certain levels of insurance, not maintaining an office in the state, and not informally or formally agreeing to provide care on a regular or routine basis. See Colo. Rev. Stat. § 12-240-107. Reimbursement Before the pandemic, reimbursement options for telehealth were limited and low payment rates were a significant financial burden for providers seeking to provide telehealth services. As we described in a previous blog post, CMS implemented sweeping changes to Medicare reimbursement and coverage requirements at the start of the COVID-19 outbreak. Dozens of new services were added to the list of telehealth services covered by Medicare, restrictions on geography and originating sites were removed, and payment rates for telehealth services were raised to match the rates for the same in-person service. On July 13, CMS released its annual proposed rule for payments under the Medicare Physician Fee Schedule, which would make many temporary Medicare flexibilities for mental and behavioral health services permanent. If finalized, the rule would allow beneficiaries to receive such telehealth services from home, reimburse providers for audio-only services, and keep certain recently added services on the Medicare telehealth list through December 31, 2023. The rule would require an in-person visit within six months prior to an initial telehealth service and at least once every six months thereafter, but CMS is seeking input on whether a different interval may be necessary or appropriate. The agency is also soliciting comment on: Whether additional documentation should be required in the patient’s medical record to support the clinical appropriateness of audio-only telehealth; Whether or not audio-only telehealth for particular high-level services should be covered; and What additional guardrails should be put in place in order to minimize concerns about program integrity and patient safety. Several states have passed or proposed payment parity legislation that would permanently require insurance coverage and/or reimbursement for certain telehealth services at a level equal to in-person visits. For example, legislation was recently enacted in Oklahoma requiring payment parity for all telemedicine services. In states like Georgia and California, laws require equal coverage for both virtual and in-person services, but allow payers and providers to negotiate alternate payment rates. A recent Connecticut law requires payment parity for telehealth services under its state Medicaid program, and a Massachusetts law mandates payment parity for behavioral health services. Privacy In response to the pandemic, the Office for Civil Rights (“OCR”) announced several telehealth flexibilities to allow providers to care for patients remotely during the pandemic. OCR announced it would not impose penalties on providers for noncompliance with certain HIPAA obligations in connection with their “good faith provision of telehealth” using any non-public communication platform, such as FaceTime or Zoom. Given increasing concerns about cybersecurity and privacy risks, we expect continued discussions at the federal and state level about how to safeguard patient’s health information while allowing continued access to telehealth services. Providers should conduct a comprehensive risk assessment of its privacy and security protections and vendor agreements to ensure all telehealth technologies and IT systems comply with HIPAA standards. Conclusion The COVID-19 pandemic has profoundly changed the health care delivery landscape. As emergency orders end and regulatory flexibilities expire, policymakers at the state and national level are considering how best to regulate telehealth post-pandemic. Telehealth services ease the burden of obtaining quality healthcare services for medically underserved populations, including communities of color, people with disabilities, and residents of rural areas.  Telehealth also gives patients the opportunity to conveniently obtain routine and preventative care, which could positively impact health outcomes and improve health equity. Dorsey attorneys are closely monitoring federal and state actions regarding telehealth. For more information on how to navigate the existing legal landscape and prepare for future developments, contact the authors or your regular Dorsey attorney.