Medicare Compliance & Reimbursement

Ask yourself three basic questions to gauge whether you‘re in violation.

It’s important to keep yourself up to date with the changes that have been made to the group of strict regulations that prohibit physician self-referrals — better known as the Stark Law. To give you a leg up, we’ve broken down the most important information that the OIG offered in its January podcast, "Self-Referral Law," presented by the Office of Inspector General’s (OIG’s) James Cannatti, Esq.

Review the Stark Basics

For Medicare cases (and potentially other payers on the state level), Stark prohibits physicians from making a referral to a "designated health service" (DHS) in which the physician or a direct family member of the physician has a financial relationship. There are exceptions to the rule, however.

Section 1877 of the Social Security Act, also known as the physician self-referral law and commonly referred to as the "Stark Law" specifies that it:

1. Prohibits a physician from making referrals for certain designated health services (DHS) payable by Medicare to an entity with which he or she (or an immediate family member) has a financial relationship (ownership, investment, or compensation), unless an exception applies.

2. Prohibits the entity from presenting or causing to be presented claims to Medicare (or billing another individual, entity, or third party payer) for those referred services.

3. Establishes a number of specific exceptions and grants the Secretary the authority to create regulatory exceptions for financial relationships that do not pose a risk of program or patient abuse.

According to the CMS FAQ section on the CMS website, "No Medicare payment may be made for DHS rendered as a result of a prohibited referral, and an entity must timely refund any amounts collected for DHS performed under a prohibited referral. Civil money penalties and other remedies may also apply under some circumstances."

In other words: "Any time a physician refers a patient to obtain services from another organization in which the physician has ownership interest or a member of his family has ownership interests, it can be a Stark violation," says Ester Horowitz, CMC, CITRMS, certified management counselor and owner/practice marketing advisor with M2Power Inc. in Merrick, N.Y. For example, "a medical doctor referring patients to a … service his wife owns" would be a Stark violation, she adds.

Note: A DHS can be anything from rehabilitation therapy services to imaging services or DME. According to CMS, the following are all DHS:

1. Clinical laboratory services.
2. Physical therapy services.
3. Occupational therapy services.
4. Outpatient speech-language pathology services.
5. Radiology and certain other imaging services.
6. Radiation therapy services and supplies.
7. Durable medical equipment and supplies.
8. Parenteral and enteral nutrients, equipment, and supplies.
9. Prosthetics, orthotics, and prosthetic devices and supplies.
10. Home health services.
11. Outpatient prescription drugs.
12. Inpatient and outpatient hospital services.

Ask the Right Questions

To gauge whether you could be violating the Stark Law, you must ask yourself three basic questions, Cannatti said. First, determine whether a physician has made a referral for a DHS. For instance, has the physician requested a clinical lab service? If the answer is yes, move on to question two, he advises: Does the physician or his immediate family member have a financial relationship with the entity providing the DHS?

Example: Your physician orders a lab service from a laboratory owned by his brother. Even if his brother doesn’t actually work in the lab itself, if he has an investment in that lab, the Stark Law comes into play and leads you to the third question, Cannatti says: Does the financial relationship fit into a Stark Law exception?

Know What ‘Exception’ Means

"There are exceptions for employment arrangements, space and equipment leases, personal services arrangements, and many others," Cannatti said during the podcast. "There are specific requirements for each exception, so you may wish to consult with your health care legal counsel about whether your arrangements meet all the requirements of an exception."

If you determine that your arrangement meets a Stark Law exception, then you are in the clear. If, however, you don’t fit into an exception category, "then you’ve got yourself a Stark Law problem," Cannatti adds. The example above would not qualify for an exception and is "a good example of a potential Stark violation," Horowitz says.

If this is the case for your practice, call your health care attorney to explain your situation and determine next steps.

The Medicare self-referral disclosure protocol (SDRP), provides a way for providers with actual or potential Stark (self-referral) violations to come clean. "The SRDP requires health care providers … to submit all information necessary for CMS … to analyze the actual or potential violation" of the Stark Law, CMS says. The provision "gives the Secretary of [the Department of Health and Human Services] the authority to reduce the amount due and owing for violations." The SRDP is located on the CMS website at www.cms.gov/PhysicianSelfReferral.

Best bet: Stark involves many complex details that cannot be succinctly applied to all situations, so your best bet is to discuss all questionable scenarios with a lawyer. "Every practice should check with a healthcare attorney for potential Stark violations," Horowitz advises.

Important: The Stark Law is a strict liability statute, which means proof of specific intent to violate the law is not required for the government to impose fines or stipulate exclusion from participation in the Federal health care programs.