Knowledge of Stark laws essential for practitioners

Ignoring rules governing reimbursement and referrals for Medicare and Medicaid patients can lead to stiff penalties.

Issue: August 2008

A working knowledge of government regulations on financial relationships between medical entities is essential to avoid costly litigation, according to O. William Brown, MD, JD.

Brown, clinical professor of surgery at Wayne State University School of Medicine in Detroit and adjunct law professor the Michigan State University College of Law in East Lansing, said the government regulation known as the Stark law is particularly important for physicians.

“Basically, the Stark law prohibits a physician from referring a patient to an entity if the physician or a family member has a financial relationship with that entity,” Brown said during a presentation at the 2008 Vascular Annual Meeting. “It also prohibits the submitting of a claim for reimbursement of these services.”

Violations and exceptions

For the government to show that a practitioner or other entity has violated the Stark law, according to Brown, it must show several things. The government must show a financial relationship exists between the entities and that the physician made a referral to the entity for a designated service. The government also must show that a claim for reimbursement was filed for the service and that no exceptions to the law were met.

The Stark law includes several exceptions for certain arrangements and facilities. Services provided personally by a member of the referring physician’s group are exempted from the Stark law, as are in-office ancillary services provided by the referring physician or by a member of the physician’s group. Services located within the same building in which the referring physician generally practices also are exempted, as long as the designated health service provided is not the primary reason for the patient contacting the physician.

“If you see somebody for a swollen arm, and you then say that patient needs a mammogram and you have some arrangement in which you get money back for mammograms that are done in this situation, that is not subject to Stark law because the patient did not see you originally for a breast lesion,” Brown said.

Generally, academic medical centers also are exempted if compensation amounts are set in advance and are not based on referral volume. The referring physicians also must be bona fide employees or faculty appointments of the medical center, or must provide substantial academic or teaching services for the medical center. Group practices also may compensate their members for productivity, but the payment cannot be based on the volume or value of the physicians’ referrals.

Stiff penalties

Penalties for violations of the Stark law include nonpayment for claims filed, a civil penalty $15,000 per instance if the claimant filed the claim despite knowing the law had been violated and $100,000 per instance if it is demonstrated that the claimant attempted to circumvent Stark law.

“This used to be sort of a paper-type Stark law, but now it is a lion with very sharp teeth,” Brown said. “The government is not kidding around and they will go after you.”

Obtaining informed counsel and familiarizing oneself with the provisions of and exceptions to the Stark law, according to Brown, can be beneficial to uncertain physicians.

“It is important that if there is question as to whether or not a relationship is governed by the Stark law that you obtain a legal opinion,” Brown said. – by Eric Raible

In general, Centers for Medicare and Medicaid Services and Congress, as well as some physicians and others, have identified the general phenomenon of “self-referral” as an area of physician abuse. Imaging ordered and then performed by physicians who are also seeing the patient is viewed as a cost that should be eliminated. Hospitals and radiologists in particular see practitioner-provided imaging as a threat to their own facilities, for example. Physicians who own imaging equipment, not surprisingly, use it and order more imaging studies than physicians who must send patients to an outside facility. However, little evidence exists to prove that the level of inappropriate imaging differs based on who owns the equipment. Responsible professional organizations such as the American College of Cardiology have long advocated for implementation of rigorous evidence- and guideline-based appropriate use criteria and lab accreditation to ensure that the right imaging procedure is performed on the right patient at the right time to positively influence patient outcomes.

– Samuel L. Wann, MD
Cardiology Today Section Editor

For more information:

Brown OW. Stark 2008: What it means to you. #C4. 2008 Vascular Annual Meeting; June 5-8, 2008; San Diego.