In January of 2019, the Centers for Medicare and Medicaid Services (“CMS”) implemented a helpful change to the signature exception to the Stark Law. In particular, the exception may now be used more than once during a 3-year period for compensation arrangements with the same referring physician.

History of Signature Exception

The signature exception to the Stark Law has undergone several revisions within the past few years. The original version of the exception was implemented by CMS effective October 1, 2008 in response to concerns regarding the potential for significant Stark Law penalties for mere “technical” violations of the statute. The original language in the signature exception provided for a grace period for noncompliance with the signature requirement of many of the compensation arrangement exceptions to the Stark Law, such as the personal service arrangements exception and fair market value exception. In particular, a 90-day grace period was permitted for late signatures that were inadvertent, and a 30-day grace period was permitted for late signatures that were “not inadvertent.” In addition, the exception could only be used once for the same referring physician during a 3-year period. In other words, after the exception was used once by a DHS entity for a late signature on a compensation agreement with a referring physician, any late signatures on other agreements entered into by the DHS entity and the same referring physician during the following 3-year period would trigger a violation of the Stark Law.

This version of the exception remained in place for several years. However, effective January 1, 2016, CMS relaxed the signature exception, due largely in part to the difficulty in determining whether a late signature was truly inadvertent versus not inadvertent. To address this issue, CMS removed the inadvertent and not inadvertent distinction from the exception, and simply provided for a 90 day grace period for all late signatures regardless of the cause. However, the limitation on use of the exception only once in a 3-year period remained in place.

Elimination of 3-Year Limitation

The most recent revision to the signature exception finally eliminates the 3-year limitation. The change was made to ensure consistency with changes made by the Bipartisan Budget Act to the Stark Law effective February 9, 2018. When finalizing the change to the regulatory exception, CMS specifically stated in the preamble that even though the regulatory changes would be effective January 1, 2019, parties could avail themselves of the statutory signature exception enacted under the Bipartisan Budget Act retroactive to its enactment date (i.e., February 9, 2018). The statutory exception is virtually identical to the regulatory exception finalized by CMS, so there are no additional hurdles to meet if using the statutory exception instead of the regulatory exception.

The latest revision to the signature exception provides a helpful reprieve from a technical requirement of the compensation arrangement exceptions to the Stark Law that most would argue was unnecessary to protect against overutilization or inappropriate referrals.  However, it is important to note that the 90-day limitation is still in effect under the exception. It remains to be seen whether CMS will further relax that requirement in the future.