BLOG: Health care regulatory 101: Family members’ financial relationships
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Key takeaways:
- Financial relationships between a DHS-furnishing entity and a referring physician’s family member can implicate the Stark Law.
- It is a violation even if the referring physician is not aware of the relationship.
You might remember our earlier blog post on the Physician Self-Referral Law, aka the Stark Law.
This prohibits a physician from referring Medicare or Medicaid patients to outside practices or facilities for designated health services (DHS) if the referring physician has a financial relationship with that outside practice or facility. But referring physicians and entities that furnish DHS should be careful not to forget that financial relationships between a DHS-furnishing entity and a referring physician’s immediate family member also can implicate the Stark Law.
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The Stark Law defines “immediate family member” broadly to include husband or wife; birth or adoptive parent, child or sibling; stepparent, stepchild, stepbrother or stepsister; father-in-law, mother-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law; grandparent or grandchild; and spouse of a grandparent or grandchild.
Below are a few examples of arrangements that might need to be reviewed for compliance with the Stark Law because of a financial relationship between a DHS-furnishing entity and a referring physician’s family member:
- A physician refers a patient to purchase durable medical equipment from a company that is owned by the physician’s brother-in-law.
- A physician sends a patient for an X-ray to an outside radiology group where the physician’s son is employed as a radiology technician.
- A physician writes a prescription that the patient fills at a pharmacy managed by the physician’s spouse.
- A physician orders tests from an independent lab that employs the physician’s spouse as a sales representative.
In each of these cases, the physician may not be permitted to refer patients to the entities with whom the physician’s family member has a financial relationship, and the entities may not be permitted to submit claims to Medicare for the services furnished subject to the physician’s order.
It’s also important to remember in this context that the Stark Law is a strict liability statute. That means even if the referring physician is not aware of the financial relationship between his or her immediate family member and the DHS entity, any DHS referral he or she makes to that entity will constitute a violation of the Stark Law and could require disclosure and repayment of an overpayment to CMS.
If you are pursuing a sale of your practice, the buyer will likely expect you and any other practice owners to make representations in the purchase agreement that your practice is compliant with the Stark Law, so it is important for you to independently confirm that your practice is, in fact, compliant and, if there is a Stark Law violation, to resolve past or ongoing Stark Law violations appropriately.
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