The proposed site-neutral rule for outpatient care for 2017 released by the Centers for Medicare & Medicaid Services could leave hospitals and physicians at risk for violating federal fraud and abuse laws, finds a recent legal analysis commissioned by the American Hospital Association.

The site-neutral rule would alter the way Medicare reimburses hospitals and physicians for services performed at certain off-campus hospital outpatient departments. Although not the only flaw in the proposed CMS rule, this payment change “puts the hospital community in an untenable position by creating unavoidable legal risks,” Melinda Hatton, senior vice president and general counsel for the American Hospital Association said in a news release discussing the analysis, which was prepared for the AHA by law firm Hogan Lovells.

The AHA is concerned the rule proposal conflicts the Stark and Anti-Kickback Laws. The heart of the laws state that hospitals may not provide free goods or services to referring physicians. And the conducted analysis finds "significant implications" if hospitals continue to bear the costs for operation of a hospital outpatient department at no cost to physicians.

Tom Nickels, executive vice president of the AHA, wrote in a letter to Andy Slavitt, acting administrator at CMS that "because CMS cannot finalize its proposal without forcing impacted hospitals to accept significant compliance risk, it must delay the implementation of the site-neutral policies in the proposed rule by at least one year."

The AHA will be submitting further comments pointing to additional flaws in the rule along with additional reasons for the CMS to delay these new policies.