"Stark" is a self-referral law applicable to referrals for certain enumerated "Designated Health Services," commonly referred to as "DHS.” Generally speaking, Stark prohibits a physician from referring a patient for DHS if the physician has a financial relationship with the provider of these services. For Stark’s purposes, the vast majority of health care providers are treated as "physicians.” While Stark's mandates usually apply to healthcare providers which receive payment from a program authorized by the Social Security Act, even those physicians who do not accept payment under a subject federal or state entitlement program, are bound by a similar regulation promulgated by the New York State legislature, thus having the effect of universally regulating self referrals. The New York Stark law covers clinical laboratory services, pharmacy services, radiation therapy services, physical therapy services and x-ray and imaging services.
When a provider engages in a relationship to deliver clinical laboratory services, physical and occupational therapy services, speech-language pathology services, radiology and other imaging services, radiation therapy services and supplies, durable medical equipment and supplies, parenteral and enteral nutrient supplementation, equipment and supplies, prosthetics, orthotics and prosthetic devices and supplies, home health services and outpatient prescription drugs, among other services, he or she must be very sensitive to structure of the business relationship that underlies the service. Generally speaking, invasive or interventional radiology services are not considered part of the DHS class.
Frequently, a determining factor is whether the relationship is deemed to be a bona fide employment relationship versus an independent contractor relationship. Physicians, chiropractors and physical therapists typically gravitate toward equipment and space lease arrangements or license agreements to facilitate compliant delivery of DHS. While there are many instances where these arrangements can be compliant when effected through such formal legal relationships, the nuances to each aspect of the relationship require the greatest attention and often serve to modulate the financial drivers of the deal. Common sense exceptions exist, including referrals made among radiologists as these are typically required because of technical or sub-specialty limitations of the referring radiologists.
The in-office ancillary services exception reflects certain recognized needs for physicians to deliver testing services or other deep services to their patients on an in-house basis. The realm of clinical cognitive cardiology is a good example since the delivery of an echocardiogram, stress echocardiogram or nuclear stress test will technically be considered a self referral if it weren't for the in-office ancillary services exception. On the one hand, this exception is preserved so that cardiologist and like physicians can deliver services within the scope of their specialty. The physician fee schedule, however, has so drastically cut reimbursement for these services as to render them barely a cash flow positive service. Typically, the standard of care requires the delivery of these and similar designated health services. It is essentially an all or nothing requirement since supervision, location and billing must all be provided from the same office and entity. Practices can share space, furniture, fixtures and equipment for the delivery of DHS to their patients provided that each practice meets the same supervision, location and billing requirement test. The key for all permutations of the in-office ancillary services exception is that services are provided at the office facility and in the instance of independent contractors, all interpretations must be provided (meaning study interpretation and dictation) within the office.
The most common "whistleblowers" of prohibited relationships are former employees, former partners and occasionally, competitors. Often when practices including group practices, consult with our office with an eye toward reorganization, dissolution, physician termination or expansion early on, we assess the legal integrity of the existing business relationships. We take these precursory measures in order to assess vulnerability based upon prior business practices, and to implement a plan of correction that is maintained and integral with the original purpose of our engagement as counsel.
Rarely does a Stark violation happen on an anecdotal basis, as it usually derives from a flaw in the client’s business model. Therefore, the penalty of $15,000 per instance of prohibited service, coupled with a $100,000 civil penalty for each offending business arrangement, usually results in devastating financial loss.
The federal Anti-Kickback Law (the "AKL"), the federal Civil Monetary Penalties statute (the "CMP Law") and the fee-splitting prohibition contained in §6509-a of the New York Education Law make clear that the payment of remuneration or anything of value in exchange for referrals is prohibited. The AKL prohibits the payment of money or any other remuneration, directly or indirectly, in return for the referral of any item or service for which payment may be made (in whole or in part) under a government health program. The CMP Law effectively prohibits the same conduct. However, the AKL and the CMP are different in that the AKL is a criminal statute (requiring the government to prove intent), while the government is only required to meet a "knew or should have known" standard in order to prove CMP Law violations. A conviction under the AKL brings with it the prospect of jail and significant fines, while conduct violating the CMP Law will usually result in civil monetary penalties and potential exclusion from Medicare and other federal health programs. Violations of the AKL and the CMP Law may also lead to prosecutions under the federal False Claims Act.