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An Overview Of Staying Compliant With Stark Law

Wednesday, October 4th, 2017

The Stark Law is a federal law that prohibits doctors from engaging in “self-referrals.” A self-referral occurs when a doctor orders a designated health service that is payable by Medicaid or Medicare and that service is provided by an entity with which the physician has a financial relationship. For example, unless an exception to the law is met, a physician cannot recommend a patient receive physical therapy from a practice that is owned by the physician’s wife. A physician cannot refer a patient to another healthcare provider for designated health services where the physician is a part owner.

The Stark Law forbids care providers from billing Medicare (or Medicaid) for services provided in violation of the law. The Centers for Medicare and Medicaid Services has drafted extensive regulations and exceptions to the Stark Law. These regulations are complex and difficult to comply with, and the costs of non-compliance are steep. To assist you, this guide will go over the basics of the Stark Law and discuss what you can do to ensure you remain in compliance.

Who is your immediate family?

A physician may not make referrals to entities that have a financial relationship with the physician or their immediate family members. The Stark Law attributes these referrals to the physician and subjects them to penalties.

Immediate family includes parents, in-laws, adopted children, stepchildren, spouses, children, siblings, grandparents, grandchildren, and spouses of grandchildren. The regulations use broad terms that are defined liberally, so you must to ensure to account for every possible variance and/or violation of Stark Law.

What constitutes a direct or indirect financial relationship?

A financial relationship is any direct or indirect investment or ownership interest in or compensation agreement with an entity that provides designated health services. A direct financial relationship is present if the relationship is just between the doctor or a member of their immediate family and the entity. An indirect financial relationship exists if there is an unbroken chain of people and/or entities between the doctor or member of their immediate family and the entity. Therefore, physicians need to be aware of their own financial relationships and the financial relationships of their family. The Stark Law attributes financial ties from a physician’s immediate family members to the physician for purposes of compliance.

In theory, Stark Law sounds insurmountably difficult to comply with. However, financial entanglements with designated health service providers are relatively rare. A physician should primarily be concerned with financial relationships that their family members may have in the medical field.

Ownership and investment interests

Ownership and investment interests include all equity, stock, stock options, debt, and ownership interests, like memberships and partnerships. Luckily, retirement plans are specifically excluded, so you don’t need to track the decisions made by your family member’s 401k investors. Ownership and investment interests also include interests in entities that have their own “ownership and investment” interests, as such interests may create indirect ownership or investment interests. For example, you may own stock in a company that is not publically traded and that company is an investor in a designated health service provider. You likely violate the Stark Law if you make referrals to that provider for designated health services due to your intermediary investment.

Compensation arrangements

A compensation arrangement is an agreement that involves any form of payment from a physician or immediate family member and an entity providing designated health services. As you can imagine, it is very easy to fall under this definition and hard to determine when you actually do. The rules also apply to agreements between a medical practice and an entity furnishing designated health services.

Remaining in compliance with the Stark Law is remarkably complex but vital. Both physicians, who can face steep penalties, and designated health service providers, who risk nonpayment of services rendered, must adhere to this law.

If you want to ensure your practice is compliant with the Stark Law, the healthcare attorneys at Brown & Fortunato can help. We are a multi-service law firm with broad experience in advising hospitals, medical groups, and other practices on complying with medical regulations and laws. Call us at (806) 345-6300 or Contact Us by email to learn more about our Practice Areas. You can also visit us in person at 905 S. Fillmore St., Suite 400, in Amarillo, Texas.