Stark Law and Non-Hospital Providers

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By Adrienne Dresevic, Esq., and Leslie A. Rojas, Esq. adrienneleslie-rojas

On August 14, 2014, the US Department of Justice (DOJ) announced that a cardiology practice agreed to pay the federal government $1,336,636.98, plus interest, to settle allegations that the practice violated the Physician Self-Referral Law (Stark Law), and thereby also violated the False Claims Act (see the DOJ press release). Most Stark Law settlements to date have focused on hospitals and larger entities. This recent settlement demonstrates that the federal government is using the full breadth of its power to target entities of all types and sizes – not just hospitals – for Stark Law violations.

 

The Stark Law and The Recent Settlement

The purpose of the Stark Law is to safeguard against improper financial incentives that compromise a physician’s medical judgment and encourage unnecessary referrals, which in turn increase healthcare costs for federal healthcare programs. Unless an exception applies, the Stark Law prohibits physicians from referring federal healthcare beneficiaries for designated health services to an entity with which the physician (or immediate family member) has a direct or indirect financial relationship. In the case of referrals within the physician’s own practice, the Stark Law forbids practices from compensating their physicians in a manner that directly takes into account the volume or value of a physician’s referrals for designated health services that are not personally performed by the ordering physician.

In the recent press release, the DOJ reports that the New York-based cardiology practice knowingly violated the Stark Law and False Claims Act by implementing a compensation arrangement by which “compensation for each…partner-physician was determined using a formula that took into account the volume or value of that physician’s referrals for nuclear scans and CT scans.” The Office of Inspector General, working in conjunction with the DOJ, commented that this compensation system had the potential to influence medical judgment. This investigation and settlement evidences the federal government’s commitment to ensuring that medical decisions are based on the best interests of the patient rather than the financial interests of the physician.

 

What Can Physicians And Non-Hospital Providers Do To Protect Themselves? 

Physicians and non-hospital providers should take a proactive approach to Stark Law compliance. If you are a traditional referring physician practice providing imaging services, then this is a good time for you to review your practice’s compensation guidelines and, in particular, profit sharing related to designated health services (as defined by the Stark Law) to ensure that physician compensation is not directly tied to the volume or value of referrals. If you are a radiology practice, then you should review your financial relationships (eg, leases) with referring physicians for compliance with the Stark Law.


Adrienne Dresevic, Esq. graduated Magna Cum Laude from Wayne State University Law School. Practicing healthcare law, she concentrates in Stark and fraud/abuse, representing various diagnostic imaging providers, e.g., IDTFs, mobile leasing entities, and radiology and multi-specialty group practices.

Leslie Rojas, Esq. graduated from Wayne State University Law School and is licensed to practice law in Michigan and Illinois. Practicing healthcare law, she concentrates on fraud/abuse issues, compliance with federal and state healthcare regulations, health information privacy and technology issues, and transactional and corporate aspects of healthcare.

The authors are members of The Health Law Partners, P.C. and may be reached at (248) 996-8510 or (212) 734-0128, or at www.thehlp.com.


For more regulatory news, visit www.ahraonline.org/news.

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