Seven Safe Harbors To Avoid Stark Law Violations
The Stark Law, which falls under 42 U.S. Code § 1395nn, prohibits referrals between practitioners if there is a financial relationship (including an immediate family relationship) between the two, or making a claim based on a prohibited referral.
While the statute itself sounds fairly clear, there are additional statutes that provide exceptions to the Stark Law and take various factors into consideration. Whether they could apply to your case will depend on the actions you have taken in your practice, the types of referrals you have made or received, to whom the referrals were between, and the benefits involved.
These exceptions are defenses which could help with the dismissal of a case or in minimizing any penalties you may face. Because these exceptions can be confusing, speaking with an experienced defense attorney is necessary to ensure the correct application.
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(1.) All Contracts Should Be In Writing
The Stark Law comes with many exceptions, many of which revolve around the definition of a financial relationship. Additionally, many of the exceptions look at the agreement that you have made with the person to whom you are referring patients. There are various facts that will be looked at to determine if your medical relationship falls within the definition of “financial relationship.”
In order to be able to provide a thorough explanation of the relationship you have with another person, the best practice is to have any agreements put in writing. This means that you should enter into a written contract.
Because the purpose of a written contract is to detail the agreement, you could defend accusations against you by showing your contract. As you will see below, many of the exceptions require that certain agreements must exist to fall outside of the definition of a financial relationship.
(2.) Payment for Services Should Be For Fair Market Value
If you enter into an agreement, to fall within one of the exceptions of the Stark Law, generally the payment or cost must be at fair market value.
Fair market value is the value for services or goods that would be comparable to the value on the open market. Essentially, fair market value is looking at what you agreed to pay for services versus what others are paying for the services under the same or similar market circumstances.
This means that if you are have paid more or less than the fair market value, you will unlikely be covered by one of the Stark Law exceptions. The reason to require a fair market value is to eliminate any question about whether any special referral agreements have been made. For example, if you are accused of referring patients to a doctor, prosecutors may look into any agreements that the two of you may have. If they find that you have rented equipment which would fall under 42 CFR 411.357(b) they will look to see the price you paid for the use of that equipment, and if the price is too low, you could be accused of referring patients to a practitioner who owns the equipment in exchange for a lower use rate.
Alternatively, if you were paying too high of a cost for the use of the equipment, you could be accused of accepting referrals from the practitioner who is referring patients to you. Here it would look like the referral is improper and fall under the Stark Law because you are paying for the referrals by paying more for the use of the equipment.
(3.) Lease Agreements Should Be For Fair Market Value
Even though you may have an agreement for the lease of office space, there could be a chance that you not considered to have a financial relationship with the person on the other end of the agreement and referrals may not be prohibited by the Stark Law.
According to 42 CFR 411.357 (b) if you are renting office space where the rent is for fair market value and the cost of rent does not take into account the volume of services performed nor the number of referrals made, then you may be compensated for referrals.
In 2013 a Colorado hospital that had locations in Montana settled with the United States Government for violating the Stark Law. It was alleged that when physicians made referrals to the hospital, the hospital lowered the value of their leases to below fair market value. The lower value was applied towards the officers, services maintenance for offices, and rent for the land on which a building sat.
In this example, the reason that no exception would apply is that the value of the lease went below fair market value. In addition, the value of the rent was based on the number of referrals that the physicians were making to the hospitals.
(4.) Isolated Incidents Should Be Kept To A Minimum
There could be instances when you make a one-time referral to someone whom you have a financial relationship with; however, you could fall within one of the exceptions if this referral was a one-time incident.
Under 42 CFR 411.357 (f) you could be excluded for the application of the Stark Law if you make a referral to another practitioner, regardless of your financial relationship, if the referral was a one-time incident. In this instance, the writing requirement does not apply.
However, the amount of enumeration will be scrutinized, and if it is found that the enumeration was not commercially reasonable, then you could be accused of violating the Stark Law. Additionally, for this exception to apply, this must truly be an isolated incident. Specifically, there cannot be any more referrals within six months in order for this to be classified as an isolated incident.
- That the patient is from a rural area and no other person is able to furnish the services within 25 miles or 45 minutes from that patient’s residence
- No other person is able to provide the type of service needed in a timely manner in relation to the patient’s conditions
- The receiving practitioner has researched whether another practitioner can do the job.
Call 844-239-1234 for a Confidential ConsultationExample In 2018, two urologists out of California agreed to pay $1 million under the False Claims Act. In this case, it was alleged that the doctors leased offices to other urologists at one location, and the urologists also had other locations with technical equipment. As part of the lease, the urologists told the lessees that they could bill for services referred to the other locations even though it was out of their group practice. In this example, both parties were making claims for services; however, both were not providing these services because the relationship was not of a group practice- it was simply only a lease agreement. Essentially, the services received by this patient were billed for twice, and both parties benefited from it. This is an example when the in-office ancillary services exception would not apply. (7.) Avoid Incentives and Bonuses That Take Into Account Referrals For Services While many offices try to find ways to give practitioners incentives and bonuses for the services they provide, doing so based on the number of referrals that a practitioner makes could lead to a violation of the Stark law. Example In 2014, a hospital in Albany, NY paid the United States $1,336,646.98 for compensating practitioners bonuses for the number of referrals. In fact, it was found that the hospital created a formula that would calculate the types of referrals that its practitioners made to determine the bonuses. All of the referrals that were made involved services that were to be provided by the hospital. In this example, the reason the bonuses were a violation of the Stark Law is that they were directly related and specifically took into consideration the number of referrals the practitioners made. The calculation did not take into consideration all referrals, especially the more expensive referrals: nuclear scans and CT scans.
While there are many different exceptions to the Stark Law, it generally requires that any arrangement made between the practitioners’ arrangement is:
1) In writing
2) Is at least older than one year
3) Leased space is reasonable and necessary for legitimate business and used exclusively by the lessee
4) Rent must be at fair market value
5) Does not take into account the volume of services performed or referrals made
Even though not all of these five elements will be required to fall within every exception, most of them will apply.
What Should You Do If You Are Accused?
A big reason that the Stark Law was put into place is that the United States government wants health care providers to provide services based on the needs of the patients rather than their own personal benefit. They have found that when health care providers have taken compensation into consideration, patients often do not receive the treatment they deserve.
If you have been accused of violating the Stark Law or are being sued pursuant to a Qui Tam lawsuit, the stakes are high. Often these lawsuits come with hefty fines and penalties. Like all other health care matters, seek the assistance of a defense attorney. https://www.justice.gov/opa/pr/colorado-health-care-organization-and-one-its-montana-hospitals-pay-385-million-allegedly https://www.justice.gov/opa/pr/two-california-urologists-agree-pay-more-1-million-settle-false-claims-act-allegations https://www.justice.gov/usao-ndny/pr/new-york-heart-center-pay-more-133-million-settle-allegations-false-claims-act-and