The Stark Truth about Physician Arrangements

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By Neelendu Bose, AccordMS
NBose@AccordMS.com

When it comes to physician referrals and the Stark Law, things get complicated quickly. With hefty fines and penalties that can reach six digits, no one wants to violate the statute. Yet with the vague language and complex exceptions, it’s hard to know what’s safe and what’s not when it comes to referrals.

While the Stark Law is complicated, it’s simple to see if it may apply to a referral situation.

Stark Law 101

The Stark Law prohibits referrals by physicians, for designated health service, generally for patients with Medicare or Medicaid when the referral is made to an entity that the referring physician, or a member of his or her immediate family, has a financial relationship with that entity.

  1. The Stark law, 42 U.S.C. § 1395nn, in part; the physician may not make a referral to the entity for the furnishing of designated health services for which payment otherwise may be made under this subchapter, and
  2. The entity may not present or cause to be presented a claim under this subchapter to any individual, third party payor, or other entity for designated health services furnished pursuant to a referral prohibited under subparagraph (A)

It is also important to note;

  1. There is no intent requirement
  2. There is strict liability
  3. To be protected by a safe harbor, an arrangement must satisfy all of its requirements
  4. False Claims Act may be indicated with false certification of Stark Law compliance

While covering similar areas of jurisdiction, it’s also important to note that the Stark Law is different from anti-kickback laws, and is a completely separate law. The purpose of the anti-kickback statute is to eliminate the potential for conflict of interest, where a physician could end up over-utilizing certain services, even if they are medically necessary; ultimately, driving up healthcare costs.

What Classifies as a Designated Health Service?

While the list of designated health services is a large one, these are the primary things that are contained within its definition:

  • Clinical lab services
  • Physical therapy services
  • Occupational therapy
  • Speech and language services
  • Radiology services, including MRIs, CTs, and Ultrasounds
  • Home health
  • Medical devices
  • Radiation
  • Outpatient prescription drugs
  • Parenteral and enteral nutritional services
  • Prosthetics
  • Orthotics
  • In- and out-patient hospital services

What Constitutes a Financial Relationship?

When it comes to what constitutes a financial relationship, it’s less clear. With nearly 20 exceptions or “safe harbors”, it’s difficult to fully grasp, sometimes, what is and what is not allowed.

The Penalties

As previously noted, unlike anti-kickback laws, the Stark Law does not need intent to be implicated. Even if no harm was meant to the patient, and the services were medically necessary, the physician is still held legally and financially responsible for the violation.

Sanctions in part;

  1. Denial of payment

No payment may be made under this subchapter for a designated health service which is provided in violation of subsection (a)(1) of this section.

  1. Requiring refund for certain claims

If a person collects any amounts that were billed in violation of subsection (a)(1) of this section, the person shall be liable to the individual for, and shall refund on a timely basis to the individual, any amounts so collected.

  1. Civil money penalty and exclusion for improper claim

Any person that presents or causes to be presented a bill or a claim for a service that such person knows or should know is for a service for which payment may not be made under paragraph (1) or for which a refund has not been made under paragraph (2) shall be subject to a civil money penalty of not more than $15,000 for each such service. The provisions of section 1320a–7a of this title (other than the first sentence of subsection (a) and other than subsection (b)) shall apply to a civil money penalty under the previous sentence in the same manner as such provisions apply to a penalty or proceeding under section 1320a–7a(a) of this title.

  1. Civil money penalty and exclusion for circumvention schemes

Any physician or other entity that enters into an arrangement or scheme (such as a cross-referral arrangement) which the physician or entity knows or should know has a principal purpose of assuring referrals by the physician to a particular entity which, if the physician directly made referrals to such entity, would be in violation of this section, shall be subject to a civil money penalty of not more than $100,000 for each such arrangement or scheme. The provisions of section 1320a–7a of this title (other than the first sentence of subsection (a) and other than subsection (b)) shall apply to a civil money penalty under the previous sentence in the same manner as such provisions apply to a penalty or proceeding under section 1320a–7a(a) of this title.

The key takeaway is, in this fast-paced healthcare environment, it

is crucial to re-evaluate any and all arrangements which may have the potential to implicate violations of The Stark Statute. More importantly, a provider must carefully consider the structure of all arrangements based on individual circumstances.

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Neelendu Bose serves as an independent Ethics & Compliance Officer for small to midsize healthcare organizations. Mr. Bose has obtained his Healthcare Compliance Certification from the Seton Hall School of Law, where participants examine healthcare-related laws and regulations. The program prepares compliance professionals to work hand and hand with other compliance, ethics and integrity officers, as well as healthcare consultants, and legal professionals.

In his role as a Compliance Professional, he is responsible for establishing standards, policies and procedures pertaining to regulatory requirements to help ensure legal, ethical, and proper conduct.