The Stark Amendment to Omnibus Budget Reconciliation Act of 1989 and its various amendments and administrative rules/regulations is the federal government’s system to prevent physicians from referring patients to entities in which they have a financial interest. The Stark Amendment had a three phase implementation – Stark I, II and III.
Stark I originally only applied to physicians and their family members and prohibited self-referrals to clinical laboratories in which the physician had a financial interest. Stark II amended the act in 1993 and greatly expanded covered entities beyond physicians and clinical laboratories. Generally, a physician is prohibited from making any referral to a person or entity in which the physician has a financial interest. This is generally referred to as physician self-referral. The proponents of Stark argue such arrangements may encourage over-utilization of services, in turn driving up health care costs. In addition, they believe it would create a captive referral system, which limits competition by other providers. Those in favor of relaxing Stark requirements argue that physicians who own, invest in or operate medical facilities are responding to a need for medical services which would otherwise not be met, particularly in medically under-served areas. In addition, it is often the case that physician-owned entities present a lower-cost alternative to the facilities which are located at hospitals. This is due mostly to higher overhead costs that hospitals must pass down to their services.
The Center for Medicare and Medicaid Services (CMS) is responsible for implementing the vast array of Stark regulations and statutes. In response, they continue to extend Stark’s reach by implementing regulations which greatly expand the definition of “financial interest.” Currently, a financial interest involves just about anything that results in a financial benefit to the referring physician. This could include ownership, investment, gifts, freebies, financial incentives, reduced rent, reduced fees, structured compensation arrangements, unfair compensation schemes, etc.
There are certain exceptions to Stark. For example, if the physician personally provides the services or is an employee of a medical group that provides the service, there may be no liability. This allows for multidisciplinary practices as long as the physician meets the definition of “physician in the group practice.” There are also exceptions for in-office ancillary services; however, if the arrangement is not structured as a block lease, it may not qualify for the space and equipment lease exception. Additionally, there are Safe Harbor Regulations that make exceptions for investments in large publicly traded entities, rural physician practices, etc. There are also a host of other exceptions which allow for rental of office space, employment and service arrangements with hospitals and certain other service arrangements. These arrangements must be at arms-length and at fair market value. The determination of whether or not your particular situations falls into one of these exceptions is a very complicated analysis and requires complete operational and financial disclosure. The risks of making an incorrect determination can be devastating.
Penalties include:
More Information
http://www.cms.gov/Medicare/Fraud-and-Abuse/PhysicianSelfReferral/FAQs.html
http://www.cms.gov
Hypothetical: In our hypothetical a cardiologist with a large practice wishes to invest in a joint venture the hospital is starting with a local radiology
A Michigan physician was raided by the DEA and the local police department after a thorough investigation into his prescribing practices. He immediately contacted Chapman Law Group after the raid, but not before he signed a DEA form 104 surrendering his prescribing privileges.
If you are a doctor, nurse, physician’s assistant, certified nurse assistant, physical therapist, chiropractor, therapist, psychologist, psychiatrist, or if you hold any other license governed
Physicians or other medical providers are not allowed to induce or encourage referrals for medical services that are paid by federal health programs. This prohibition
Alert: If your DEA renewal application is not received prior to the expiration of your DEA registration, you will not be allowed to handle controlled substances and
Michigan OFFICE
1441 W Long Lake Rd.
Suite 310
Troy, MI 48098
T. 248.644.6326
F. 248.644.6324
FLORIDA OFFICES
6841 Energy Ct.
Sarasota, FL 34240
T. 941.893.3449
1001 Brickell Bay Dr.
Suite 1714
Miami, FL 33131
T. 305.712.7177
Practice Areas
Attorneys
© CHAPMAN LAW GROUP. ALL RIGHTS RESERVED
Send this to a friend
