Medicare Fraud & Medicare Fraud & Abuse/Stark LawsAbuse/Stark Lawsand Regulationsand Regulations

Presented to University of VirginiaPresented to University of VirginiaDepartment of OphthalmologyDepartment of Ophthalmology

September 7, 2011September 7, 2011By Philip M. Sprinkle II, EsquireBy Philip M. Sprinkle II, Esquire

Balch & Bingham, LLPBalch & Bingham, LLP

Part IPart I

History and Development of History and Development of Government ActivityGovernment Activity

Current Enforcement ActivityCurrent Enforcement Activity

Focused enforcementFocused enforcement Attorney General Holder Speech at the Detroit Attorney General Holder Speech at the Detroit

Health Care Fraud Prevention Summit 3/15/2011Health Care Fraud Prevention Summit 3/15/2011 ““In just the last fiscal year, we obtained In just the last fiscal year, we obtained settlements settlements

and judgments amounting to more than $2.5 and judgments amounting to more than $2.5 billion in False Claims Act matters alleging health billion in False Claims Act matters alleging health care fraudcare fraud – the largest annual figure in history and an – the largest annual figure in history and an increase of more than 50% from fiscal year 2009increase of more than 50% from fiscal year 2009.  .  We also We also opened more than 2,000 new criminal and opened more than 2,000 new criminal and civil health care fraud investigationscivil health care fraud investigations, reached an , reached an all-time high in the number of health care fraud all-time high in the number of health care fraud defendants charged, stopped numerous large-scale defendants charged, stopped numerous large-scale fraud schemes in their tracks, and fraud schemes in their tracks, and returned more than returned more than $2.5 billion to the Medicare Trust Fund and more $2.5 billion to the Medicare Trust Fund and more than $800 million to cash-strapped state Medicaid than $800 million to cash-strapped state Medicaid programsprograms.”.”

Focused Enforcement (cont.)Focused Enforcement (cont.)

New Investigative Bodies (RACs, New Investigative Bodies (RACs, ZPICs, etc.)ZPICs, etc.)

$250 Million Dedicated to Increased $250 Million Dedicated to Increased EnforcementEnforcement

PART IIPART II

The History and Development of Fraud The History and Development of Fraud and Abuse in the United Statesand Abuse in the United States

What is Medicare Fraud?What is Medicare Fraud? Submitting false claims for, or making Submitting false claims for, or making

misrepresentations related to, reimbursement.misrepresentations related to, reimbursement. Providing remuneration to induce or in Providing remuneration to induce or in

exchange for referring, arranging for, or exchange for referring, arranging for, or recommending healthcare items or services.recommending healthcare items or services.

Making improper referrals of healthcare Making improper referrals of healthcare business between persons or entities having business between persons or entities having certain pre-existing financial relationships with certain pre-existing financial relationships with each other.each other.

Providing inducements to beneficiaries to Providing inducements to beneficiaries to influence the selection of a healthcare provider influence the selection of a healthcare provider or service.or service.

Providing inducements to providers to limit or Providing inducements to providers to limit or reduce service to beneficiaries.reduce service to beneficiaries.

What is Medicare Fraud?What is Medicare Fraud?In 1972In 1972, Congress first outlawed referral fees in its , Congress first outlawed referral fees in its amendments to the Social Security Act. The law stated:amendments to the Social Security Act. The law stated:Whoever furnishes items or services to an individual for Whoever furnishes items or services to an individual for which payment is or may be made under this title and which payment is or may be made under this title and who solicits, offers, or receives any --who solicits, offers, or receives any --

(1) kickback or bribe in connection with the furnishing (1) kickback or bribe in connection with the furnishing of such items or services or the making or receipt of of such items or services or the making or receipt of such payment, orsuch payment, or(2) rebate of any fee or charge for referring any such (2) rebate of any fee or charge for referring any such individual to another person for the furnishing of such individual to another person for the furnishing of such items or services,items or services,

shall be guilty of a misdemeanor and upon conviction shall be guilty of a misdemeanor and upon conviction thereof shall be fined not more than $ 10,000 or thereof shall be fined not more than $ 10,000 or imprisoned for not more than one year, or both.imprisoned for not more than one year, or both.   

Limitation On ReferralsLimitation On Referrals42 U.S.C. 42 U.S.C. § 1320a-7b(b)(1)-(2):§ 1320a-7b(b)(1)-(2):

The current statute essentially prohibits The current statute essentially prohibits individuals or entitiesindividuals or entities from knowingly and from knowingly and willfully offering, paying, soliciting, or receiving willfully offering, paying, soliciting, or receiving remuneration in order to induce business remuneration in order to induce business reimbursed under the Medicare or Medicaid reimbursed under the Medicare or Medicaid programs. Violation of the statute is a felony programs. Violation of the statute is a felony punishable by up to five (5) years punishable by up to five (5) years imprisonment, a imprisonment, a

$ 25,000 fine, or both. The statute also gives $ 25,000 fine, or both. The statute also gives the Office of Inspector General of the the Office of Inspector General of the Department of Health and Human Services the Department of Health and Human Services the power to exclude violators from participation in power to exclude violators from participation in the Medicare or Medicaid programs.the Medicare or Medicaid programs.

PunishmentPunishment

Sanctions for violations of the Medicare Fraud & Sanctions for violations of the Medicare Fraud & Abuse laws include imprisonment, criminal and Abuse laws include imprisonment, criminal and civil monetary penalties, denial of civil monetary penalties, denial of reimbursement, and exclusion from government reimbursement, and exclusion from government health programs.health programs.This statute is a This statute is a criminal criminal statute.statute.Financial penalties arise out of the Federal False Financial penalties arise out of the Federal False Claims Act Claims Act

HistoryHistoryUnited States v. GreberUnited States v. Greber (1985): (1985): Alvin Gerber was a cardiologist in Pennsylvania.Alvin Gerber was a cardiologist in Pennsylvania. Formed Cardio-Med, which provided physicians Formed Cardio-Med, which provided physicians with diagnostic services such as Holter-monitors. with diagnostic services such as Holter-monitors. Cardio-Med billed Medicare for the monitor Cardio-Med billed Medicare for the monitor service and then forwarded 40% of the Medicare service and then forwarded 40% of the Medicare payment to the referring physician.payment to the referring physician. Standard: If a fee is paid and Standard: If a fee is paid and anyany purpose of purpose of that fee is to induce referrals, the statute is that fee is to induce referrals, the statute is violated. This is true even if part of the fee is violated. This is true even if part of the fee is intended to compensate for professional services.intended to compensate for professional services.

HistoryHistoryUnited States v. Kats United States v. Kats (1989):(1989): Medical diagnostics lab contracted with a Medical diagnostics lab contracted with a medical services company to process lab work. medical services company to process lab work. The lab billed the services company which then The lab billed the services company which then billed Medicare. The lab agreed to pay the billed Medicare. The lab agreed to pay the services company 50% of the payment it received services company 50% of the payment it received from Medicare.from Medicare.One (1) Purpose Standard: If even one (1) One (1) Purpose Standard: If even one (1) purpose of a payment is to induce future purpose of a payment is to induce future referrals, there is a violation of the statute even if referrals, there is a violation of the statute even if the payments were also intended to compensate the payments were also intended to compensate for professional services.for professional services.

Additional Enforcement Additional Enforcement VehiclesVehicles

1.1. Federal False Claims Act (Tied to Civil Federal False Claims Act (Tied to Civil Monetary Penalties Law)Monetary Penalties Law)

Qui Tam Qui Tam Litigation: qui tam pro domino rege quam pro se Litigation: qui tam pro domino rege quam pro se ipso in hac parte sequitur, meaning "[he] who sues in this ipso in hac parte sequitur, meaning "[he] who sues in this matter for the king as [well as] for himself." matter for the king as [well as] for himself."

Who are these “Relators?”Who are these “Relators?” Finder’s Fee of 10-30% of total collectedFinder’s Fee of 10-30% of total collected $5,500-11,000 penalty for each violation (beware the low-cost $5,500-11,000 penalty for each violation (beware the low-cost

but repeated error—each single bill is a separate violation)but repeated error—each single bill is a separate violation) Treble damages (computed after assessing all amounts due Treble damages (computed after assessing all amounts due

plusplus all penalties) all penalties) Plus Attorneys’ FeesPlus Attorneys’ Fees

2.2. Benefits of Self-ReportingBenefits of Self-Reporting3.3. Some Licensure Regulations Some Licensure Regulations RequireRequire

Practitioners to Self ReportPractitioners to Self Report4.4. ““Health Care Offense” under 18 U.S.C. Section Health Care Offense” under 18 U.S.C. Section

2424

DO NOT FORGET STATE LAW DO NOT FORGET STATE LAW VIOLATIONSVIOLATIONS

Anti-Brokering StatuteAnti-Brokering Statute Professional Licensure Anti-kickback Professional Licensure Anti-kickback

ProvisionsProvisions Active Board of Medicine in Florida Active Board of Medicine in Florida

and other jurisdictionsand other jurisdictions

Safe HarborsSafe HarborsIn response to demands by the industry for In response to demands by the industry for guidance, the Officer of Inspector General guidance, the Officer of Inspector General issued the first safe harbor exclusions to the issued the first safe harbor exclusions to the anti-fraud statute in 1991. Those exclusions anti-fraud statute in 1991. Those exclusions were codified by Congress in August, 1993, as were codified by Congress in August, 1993, as 42 U.S.C. § 1395nn. The accompanying 42 U.S.C. § 1395nn. The accompanying regulations are located at 42 C.F.R. § regulations are located at 42 C.F.R. § 1001.952. The most common safe harbors 1001.952. The most common safe harbors are:are:

1. Personal Services1. Personal Services2. 2. Bona FideBona Fide Employees Employees3. Small Investments3. Small Investments4. Equipment Rental4. Equipment Rental5. Leases5. Leases

Safe HarborsSafe HarborsWhat are safe harbors?What are safe harbors? If you comply with all elements of a safe harbor, If you comply with all elements of a safe harbor,

you will not be scrutinized for prosecution.you will not be scrutinized for prosecution. Failure to comply with the safe harbor provisions Failure to comply with the safe harbor provisions

does not mean you are breaking the law. It does not mean you are breaking the law. It simply means that you may be scrutinized for a simply means that you may be scrutinized for a violation of the Fraud and Abuse laws.violation of the Fraud and Abuse laws.

If any action is taken to induce a referral If any action is taken to induce a referral fee, it is a violation of the law. This is true fee, it is a violation of the law. This is true even where inducement of the referral fee even where inducement of the referral fee was not the primary purpose of the action.was not the primary purpose of the action.

Safe HarborsSafe HarborsPersonal Services:Personal Services:

The agreement must be set out in writing, signed The agreement must be set out in writing, signed by the parties, and specify the services to be by the parties, and specify the services to be covered by the arrangement. covered by the arrangement.

The agreement must cover all services provided The agreement must cover all services provided by the physician to the entity.by the physician to the entity.

The services provided to the entity must be The services provided to the entity must be reasonable and necessary.reasonable and necessary.

The term of the agreement is at least 1 year.The term of the agreement is at least 1 year. The compensation is set out in advance and does The compensation is set out in advance and does

not exceed the fair market value of the services.not exceed the fair market value of the services. The services provided cannot include promotion The services provided cannot include promotion

of a business arrangement.of a business arrangement.

Safe HarborsSafe HarborsBona Fide Bona Fide Employees:Employees:

An employer may pay a physician who has a An employer may pay a physician who has a bona fide employment relationship with the bona fide employment relationship with the employer for the provision of services if:employer for the provision of services if: The employment is for identifiable services. The employment is for identifiable services. The amount paid to the physician is consistent The amount paid to the physician is consistent

with the fair market value of the services and with the fair market value of the services and is not determined in a manner that accounts is not determined in a manner that accounts for the volume or value of referrals made by for the volume or value of referrals made by the referring physician.the referring physician.

The agreement between the physician and The agreement between the physician and employer would be commercially reasonable employer would be commercially reasonable even if no referrals were made to the even if no referrals were made to the employer.employer.

Safe HarborsSafe HarborsEquipment Rental:Equipment Rental:

Payments made for use of equipment do not Payments made for use of equipment do not violate the statute if:violate the statute if: The lease is set out in a written agreement The lease is set out in a written agreement

signed by the parties which specifies the signed by the parties which specifies the equipment to be covered by the lease.equipment to be covered by the lease.

The equipment leased does not exceed what The equipment leased does not exceed what is reasonable and necessary for the business is reasonable and necessary for the business purposes of the lease.purposes of the lease.

The equipment is used exclusively by the The equipment is used exclusively by the person leasing the equipment.person leasing the equipment.

The term is more than one year.The term is more than one year.

Safe HarborsSafe HarborsEquipment Rental (continued):Equipment Rental (continued):

The rental charges are set out in advance and The rental charges are set out in advance and are consistent with the fair market value of are consistent with the fair market value of the equipment.the equipment.

The rental charges are not determined in a The rental charges are not determined in a manner that accounts for the volume or value manner that accounts for the volume or value of referrals made between the parties.of referrals made between the parties.

The lease would be commercially viable even The lease would be commercially viable even if no referrals were made between the parties.if no referrals were made between the parties.

Safe HarborsSafe HarborsOther Safe Harbor Provisions:Other Safe Harbor Provisions: Investment InterestInvestment Interest Space RentalSpace Rental Sale of PracticeSale of Practice Referral ServicesReferral Services WarrantiesWarranties DiscountsDiscounts Group Purchasing OrganizationsGroup Purchasing Organizations Waiver of beneficiary coinsurance and deductible amountsWaiver of beneficiary coinsurance and deductible amounts Increased coverage, reduced cost-sharing amounts, or Increased coverage, reduced cost-sharing amounts, or

reduced premium amounts offered by health plansreduced premium amounts offered by health plans Price reductions on health plansPrice reductions on health plans Practitioner RecruitmentPractitioner Recruitment

Safe HarborsSafe HarborsOther Safe Harbor Provisions (Continued):Other Safe Harbor Provisions (Continued): Obstetrical malpractice insurance subsidiesObstetrical malpractice insurance subsidies Investments in group practicesInvestments in group practices Cooperative hospital service organizationsCooperative hospital service organizations Ambulatory surgery centersAmbulatory surgery centers Referral arrangements for specialty servicesReferral arrangements for specialty services Price reductions offered to eligible managed care organizationsPrice reductions offered to eligible managed care organizations Price reductions offered by contractors with substantial financial Price reductions offered by contractors with substantial financial

risk to managed care organizationsrisk to managed care organizations Ambulance replenishingAmbulance replenishing Transfers from an individual or entity to a health centerTransfers from an individual or entity to a health center Electronic prescribing items and servicesElectronic prescribing items and services Electronic health records items and servicesElectronic health records items and services

New Enforcement FlexibilityNew Enforcement Flexibility

Returning Medicare overpayments within 60 days of identification of the overpayment is now an obligation under the False Claims Act Providers or suppliers who fail to return

an overpayment within 60 days of identification will be guilty of False Claims Act violations

The 60 day period commences when a person “knows” of the overpayment

Enforcement Flexibility (cont.)Enforcement Flexibility (cont.)

Impact of Downstream Contractors Impact of Downstream Contractors Who have no contract with the Who have no contract with the federal governmentfederal government

Emphasis on Officer LiabilityEmphasis on Officer Liability Easing of Burdens of ProofEasing of Burdens of Proof Source: FERA Amendments and Source: FERA Amendments and

Patient Protection and Affordable Patient Protection and Affordable Care ActCare Act

Useful ToolsUseful ToolsOfficer of Inspector General:Officer of Inspector General:

Advisory Opinions:Advisory Opinions:http://oig.hhs.gov/fraud/http://oig.hhs.gov/fraud/advisoryopinions.asp advisoryopinions.asp

Congress established the OIG advisory Congress established the OIG advisory opinion process as part of HIPAA in 1996. An opinion process as part of HIPAA in 1996. An OIG advisory opinion is a legal opinion issued OIG advisory opinion is a legal opinion issued by the Office of Inspector General to a by the Office of Inspector General to a requesting parties about the application of the requesting parties about the application of the OIG’s fraud and abuse authorities to the OIG’s fraud and abuse authorities to the party’s existing or proposed business party’s existing or proposed business arrangement. OIG has sixty days to issue an arrangement. OIG has sixty days to issue an advisory opinion after it has received all the advisory opinion after it has received all the information it needs to issue such an opinion.information it needs to issue such an opinion.

Useful ToolsUseful ToolsOfficer of Inspector General:Officer of Inspector General:

Work Plan:Work Plan:

http://oig.hhs.gov/publications/http://oig.hhs.gov/publications/workplan.aspworkplan.asp

OIG issues a work plan annually, outlining the OIG issues a work plan annually, outlining the areas in which it will focus its investigations for the areas in which it will focus its investigations for the coming year. coming year.

PART IIIPART III

History of Stark Law and RegulationsHistory of Stark Law and Regulations

BackgroundBackground

In 1989, Congress passed the Ethics in In 1989, Congress passed the Ethics in Patient Referrals Act (“Stark”) as part of the Patient Referrals Act (“Stark”) as part of the Omnibus Budget Reconciliation Act of 1989. Omnibus Budget Reconciliation Act of 1989. Prohibited physician referrals to clinical Prohibited physician referrals to clinical

laboratories in which the physician had a laboratories in which the physician had a financial interest. financial interest.

Amended in 1993 to expand the prohibitions Amended in 1993 to expand the prohibitions from clinical laboratory services to eleven from clinical laboratory services to eleven designated health services (“DHS”). designated health services (“DHS”).

Amended again in 1994 to expand the Amended again in 1994 to expand the prohibitions to services payable by Medicaid. prohibitions to services payable by Medicaid.

What is Stark?What is Stark?

The current law, 42 U.S.C. The current law, 42 U.S.C. § 1395nn, § 1395nn, statesstates::

If a If a physicianphysician has a financial relationship with has a financial relationship with an entity, then the physician may not make a an entity, then the physician may not make a referral to the entity for designated health referral to the entity for designated health services payable by the federal government; services payable by the federal government; and and

The entity may not present or cause to be The entity may not present or cause to be presented a claim or bill to any individual, third presented a claim or bill to any individual, third party payor or other entity for designated party payor or other entity for designated health services furnished pursuant to a health services furnished pursuant to a prohibited referral. prohibited referral.

What is a Financial Relationship?What is a Financial Relationship?

A “Financial Relationship” is A “Financial Relationship” is A direct or indirect ownership or investment A direct or indirect ownership or investment

interest; or interest; or A compensation arrangement with any entity A compensation arrangement with any entity

that furnishes DHS. that furnishes DHS. Ownership or Investment InterestOwnership or Investment Interest

Debt, equity or other means. (i.e., stock Debt, equity or other means. (i.e., stock ownership in a hospital.)ownership in a hospital.)

Compensation Arrangement Compensation Arrangement Any arrangement involving remuneration, Any arrangement involving remuneration,

direct or indirect, between a physician (or a direct or indirect, between a physician (or a member of a physician’s immediate family) member of a physician’s immediate family) and an entity. (i.e., salary, rent, bonuses.) and an entity. (i.e., salary, rent, bonuses.)

What is a Referral?What is a Referral? Referral means any written, oral, electronic (or any Referral means any written, oral, electronic (or any

other form):other form): Request Request Order Order Certification/Recertification of Need for DHS Certification/Recertification of Need for DHS Request for ConsultRequest for Consult Tests or procedure ordered by or to be performed by Tests or procedure ordered by or to be performed by

(or under the supervision of) that other physician, but (or under the supervision of) that other physician, but not personally performed by the referring physician not personally performed by the referring physician

The establishment of a plan of care by a physician The establishment of a plan of care by a physician that includes the provision of such a DHS, or the that includes the provision of such a DHS, or the certifying or recertifying of the need for such a DHS certifying or recertifying of the need for such a DHS

What are Designated Health Services?What are Designated Health Services? Designated Health ServicesDesignated Health Services means any of the means any of the

following services: following services: Clinical laboratory services Clinical laboratory services Physical therapy services Physical therapy services Occupational therapy servicesOccupational therapy services Certain radiology services Certain radiology services Radiation therapy services and suppliesRadiation therapy services and supplies Durable medical equipment and supplies Durable medical equipment and supplies Parenteral and enteral nutrients, equipment, and suppliesParenteral and enteral nutrients, equipment, and supplies Prosthetics, orthotics, and prosthetic devices and supplies Prosthetics, orthotics, and prosthetic devices and supplies Home health servicesHome health services Outpatient prescription drugsOutpatient prescription drugs Inpatient and outpatient hospital servicesInpatient and outpatient hospital services DHS only refers to services payable, in whole or in part, by DHS only refers to services payable, in whole or in part, by

Medicare Medicare DHS do not includeDHS do not include: :

Services reimbursed by Medicare as part of a composite rate Services reimbursed by Medicare as part of a composite rate (i.e., SNF Part A payments or certain ASC services). (i.e., SNF Part A payments or certain ASC services).

What are Designated Health Services?What are Designated Health Services? Each year CMS publishes an updated "List of codes" in the Each year CMS publishes an updated "List of codes" in the

Federal Register which contains the list of HCPCS and CPT Federal Register which contains the list of HCPCS and CPT codes for four (4) of the DHS to which Stark applies.  A list codes for four (4) of the DHS to which Stark applies.  A list of some, but not all, DHS by CPT Code is available: of some, but not all, DHS by CPT Code is available: As an addendum to each Physician Fee Schedule (i.e., 72 Fed. As an addendum to each Physician Fee Schedule (i.e., 72 Fed.

Reg. 66222, 66574 (Nov. 27, 2007); and On the CMS website Reg. 66222, 66574 (Nov. 27, 2007); and On the CMS website at: at: http://www.cms.hhs.gov/PhysicianSelfReferral/11_List_of_Codehttp://www.cms.hhs.gov/PhysicianSelfReferral/11_List_of_Codes.asp#TopOfPages.asp#TopOfPage

For example: For example: 72126 ................... Ct neck spine w/dye.72126 ................... Ct neck spine w/dye.72127 ................... Ct neck spine w/o & w/dye.72127 ................... Ct neck spine w/o & w/dye.72128 ................... Ct chest spine w/o dye.72128 ................... Ct chest spine w/o dye.72129 ................... Ct chest spine w/dye.72129 ................... Ct chest spine w/dye.72130 ................... Ct chest spine w/o & w/dye.72130 ................... Ct chest spine w/o & w/dye.72131 ................... Ct lumbar spine w/o dye.72131 ................... Ct lumbar spine w/o dye.72132 ................... Ct lumbar spine w/dye.72132 ................... Ct lumbar spine w/dye.

RegulationsRegulationsThe Centers for Medicare and Medicaid Services (“CMS”) have issued several The Centers for Medicare and Medicaid Services (“CMS”) have issued several

regulations relating to Stark. These regulations interpret the Stark regulations relating to Stark. These regulations interpret the Stark statute and respond to commentary from the public. statute and respond to commentary from the public.

Stark I Regulations (Incorporated into Stark II)Stark I Regulations (Incorporated into Stark II) Stark II RegulationsStark II Regulations

Phase IPhase I: Created several new exceptions, clarified DHS definitions, : Created several new exceptions, clarified DHS definitions, defined “referral,” and clarified indirect financial relationships. 66 defined “referral,” and clarified indirect financial relationships. 66 Fed. Reg. 856 (January 4, 2001).Fed. Reg. 856 (January 4, 2001).

Phase IIPhase II: : Discusses ownership and investment interests, the Discusses ownership and investment interests, the exceptions for certain compensation arrangements, and the exceptions for certain compensation arrangements, and the reporting requirements. 69 Fed. Reg. 16054 (March 26, 2004).reporting requirements. 69 Fed. Reg. 16054 (March 26, 2004).

Phase IIIPhase III: : This rule finalizes, and responds to public comments This rule finalizes, and responds to public comments regarding, the Phase II interim final rule with comment period. 72 regarding, the Phase II interim final rule with comment period. 72 Fed. Reg. 51012 (September 5, 2007). Phase III Notice of Delay for Fed. Reg. 51012 (September 5, 2007). Phase III Notice of Delay for “stand in the shoes” and other provisions. 72 Fed. Reg. 64161 “stand in the shoes” and other provisions. 72 Fed. Reg. 64161 (November 15, 2007). REVIEW THIS STATUTE(November 15, 2007). REVIEW THIS STATUTE

Anti-Markup Provisions – 2009 Physician Fee Schedule 73 Fed. Anti-Markup Provisions – 2009 Physician Fee Schedule 73 Fed. Reg. 69725, 69799 (November 19, 2008); 42 C.F.R. Reg. 69725, 69799 (November 19, 2008); 42 C.F.R. § 414.50.§ 414.50.

Other Updates: (e.g.notices to beneficiaries of imaging options)Other Updates: (e.g.notices to beneficiaries of imaging options)

ExceptionsExceptions Exceptions are separated into three (3) categoriesExceptions are separated into three (3) categories

1.1. Exceptions to both Ownership/Investment Interests and Exceptions to both Ownership/Investment Interests and Compensation RelationshipsCompensation Relationships

42 C.F.R. 42 C.F.R. § § 411.355 411.355

2.2. Exceptions to Ownership/Investment InterestsExceptions to Ownership/Investment Interests 42 C.F.R. 42 C.F.R. § § 411.356411.356

3.3. Exceptions to Compensation RelationshipsExceptions to Compensation Relationships 42 C.F.R. 42 C.F.R. § § 411.357411.357

In addition, Stark’s complicated definitions In addition, Stark’s complicated definitions contain exclusions, too contain exclusions, too

The definition of “referral” excludes a physician The definition of “referral” excludes a physician following the patient himself (i.e., physician has his or following the patient himself (i.e., physician has his or her own x-ray machine or ultrasound).her own x-ray machine or ultrasound).

The definition of “DHS” excludes payments made under The definition of “DHS” excludes payments made under a composite rate (e.g., managed care plans). a composite rate (e.g., managed care plans).

ExceptionsExceptions

Most commonly used exceptionsMost commonly used exceptions Physician ServicesPhysician Services In-office ancillary servicesIn-office ancillary services Personal ServicesPersonal Services Bona FideBona Fide Employment Relationships Employment Relationships Rental of EquipmentRental of Equipment

ExceptionsExceptions

Physician Services Physician Services Physician services that are Physician services that are

Furnished by another member of the Furnished by another member of the referring physician’s group or referring physician’s group or

Under the supervision of another physician Under the supervision of another physician who is a member of the referring physician’s who is a member of the referring physician’s group practice. group practice.

ExceptionsExceptions

In-Office Ancillary ServicesIn-Office Ancillary Services

Services, and some DME, that are:Services, and some DME, that are:1.1. Personally furnished by a member of Personally furnished by a member of

the group; the group;

2.2. In the “Same Building” or a In the “Same Building” or a “Centralized Location”; and “Centralized Location”; and

3.3. Billed by or through the group practice.Billed by or through the group practice.

ExceptionsExceptionsIn-Office Ancillary Services (cont.) In-Office Ancillary Services (cont.) ““Same Building” means (THIS IS AN ABBREVIATED Same Building” means (THIS IS AN ABBREVIATED

EXPLANATION):EXPLANATION): Structures sharing a single street address, Structures sharing a single street address,

excluding exterior areas (i.e., parking lots, excluding exterior areas (i.e., parking lots, courtyards, mobile vehicles). Not necessarily the courtyards, mobile vehicles). Not necessarily the same part of the building. same part of the building. Physician has an office open to patients 35+ hrs/wk; ORPhysician has an office open to patients 35+ hrs/wk; OR Physician regularly provides services to patients 30+ Physician regularly provides services to patients 30+

hrs/wk; ORhrs/wk; OR Patient receiving DHS usually receives services from the Patient receiving DHS usually receives services from the

physician, and the physician owns or rents an office open physician, and the physician owns or rents an office open to patients 8+ hrs/wk; ORto patients 8+ hrs/wk; OR

Physician is present and orders the DHS during a patient Physician is present and orders the DHS during a patient visit at an office open 8+ hrs/wk and the referring visit at an office open 8+ hrs/wk and the referring physician sees patients 6+ hrs/wk. physician sees patients 6+ hrs/wk.

““Centralized Building” means: Centralized Building” means: All or part of a building, including mobile All or part of a building, including mobile

vehicles/trailers, owned or leased on a full-time vehicles/trailers, owned or leased on a full-time basis.basis.

ExceptionsExceptions

Impact of Anti-Markup Rules to this Impact of Anti-Markup Rules to this and other exceptionsand other exceptions

Need to distinguish between PC Need to distinguish between PC (Professional Component) and TC (Professional Component) and TC (Technical Component)(Technical Component)

Location vs. Periodicity RequirementsLocation vs. Periodicity Requirements

ExceptionsExceptions

Personal Services:Personal Services: The agreement must be set out in writing, signed The agreement must be set out in writing, signed

by the parties, and specify the services to be by the parties, and specify the services to be covered by the arrangement. covered by the arrangement.

The agreement must cover all services provided The agreement must cover all services provided by the physician to the entity.by the physician to the entity.

The services provided to the entity must be The services provided to the entity must be reasonable and necessary.reasonable and necessary.

The term of the agreement is at least one (1) The term of the agreement is at least one (1) year.year.

The compensation is set out in advance and does The compensation is set out in advance and does not exceed the fair market value of the services.not exceed the fair market value of the services.

The services provided cannot include promotion The services provided cannot include promotion of a business arrangement.of a business arrangement.

ExceptionsExceptionsBona Fide Bona Fide Employees:Employees:

A compensation relationship is not a financial A compensation relationship is not a financial relationship for Stark purposes if: relationship for Stark purposes if: The employment is for identifiable services. The employment is for identifiable services. The amount paid to the physician is consistent The amount paid to the physician is consistent

with the fair market value of the services and with the fair market value of the services and is not determined in a manner that accounts is not determined in a manner that accounts for the volume or value of referrals made by for the volume or value of referrals made by the referring physician.the referring physician.

The agreement between the physician and The agreement between the physician and employer would be commercially reasonable employer would be commercially reasonable even if no referrals were made to the even if no referrals were made to the employer.employer.

Productivity Bonuses based on services Productivity Bonuses based on services personally performed by the physician are personally performed by the physician are permissible under Stark. permissible under Stark.

ExceptionsExceptionsEquipment Rental:Equipment Rental:

Payments by a lessor to a lessee for the use of Payments by a lessor to a lessee for the use of equipment is not a financial relationship if:equipment is not a financial relationship if: The lease is set out in a written agreement The lease is set out in a written agreement

signed by the parties which specifies the signed by the parties which specifies the equipment covered by the lease.equipment covered by the lease.

The equipment leased does not exceed what The equipment leased does not exceed what is reasonable and necessary for the business is reasonable and necessary for the business purposes of the lease.purposes of the lease.

The equipment is used exclusively by the The equipment is used exclusively by the person leasing the equipment.person leasing the equipment.

The term is more than one year.The term is more than one year.

ExceptionsExceptionsEquipment Rental (continued):Equipment Rental (continued):

The rental charges are set out in advance and The rental charges are set out in advance and are consistent with the fair market value of are consistent with the fair market value of the equipment.the equipment.

The rental charges are not determined in a The rental charges are not determined in a manner that accounts for the volume or value manner that accounts for the volume or value of referrals made between the parties.of referrals made between the parties.

The lease would be commercially reasonable The lease would be commercially reasonable even if no referrals were made between the even if no referrals were made between the parties.parties.

Exceptions Exceptions Other Exceptions: Other Exceptions: Services furnished by an organization to enrolleesServices furnished by an organization to enrollees Investment in Academic Medical CentersInvestment in Academic Medical Centers Implants furnished by an ambulatory surgery centerImplants furnished by an ambulatory surgery center EPO and EPO dialysis-related drugsEPO and EPO dialysis-related drugs Preventive screening tests, immunizations and vaccinesPreventive screening tests, immunizations and vaccines Eyeglasses and contact lenses following cataract surgeryEyeglasses and contact lenses following cataract surgery Intra-family rural referralsIntra-family rural referrals Publicly traded securitiesPublicly traded securities Mutual fundsMutual funds Specific Providers (Rural, hospitals in Puerto Rico, and whole-Specific Providers (Rural, hospitals in Puerto Rico, and whole-

hospital investment)hospital investment) Office space rentalOffice space rental Physician recruitmentPhysician recruitment Isolated transaction (i.e., sale of practice)Isolated transaction (i.e., sale of practice) Certain arrangements with hospitalsCertain arrangements with hospitals

ExceptionsExceptionsOther Exceptions (Continued):Other Exceptions (Continued): Group practice arrangements with hospitalsGroup practice arrangements with hospitals Payments by a physicianPayments by a physician Charitable donations by a physicianCharitable donations by a physician Non-monetary compensation less than $300Non-monetary compensation less than $300 Fair market value compensationFair market value compensation Medical staff incidental benefitsMedical staff incidental benefits Risk-sharing arrangementsRisk-sharing arrangements Compliance trainingCompliance training Indirect compensation arrangementsIndirect compensation arrangements Referral servicesReferral services Retention payments in underserved areasRetention payments in underserved areas Community-wide health information systemsCommunity-wide health information systems Electronic prescribing items and servicesElectronic prescribing items and services Electronic health records items and servicesElectronic health records items and services

ViolationsViolationsThe Stark Law is a “strict liability” statute. The Stark Law is a “strict liability” statute.

No knowledge of actual violations required to No knowledge of actual violations required to violate the statute violate the statute A bill can violate Stark even if (a) the patient A bill can violate Stark even if (a) the patient requested the referral, (b) the work was high requested the referral, (b) the work was high quality, (c) the results were favorable for the quality, (c) the results were favorable for the patient, or (d) the services were cost-effective.patient, or (d) the services were cost-effective.

Sanctions for violations of the Stark Law Sanctions for violations of the Stark Law include denial of reimbursement, civil include denial of reimbursement, civil monetary penalties, and exclusion from monetary penalties, and exclusion from government health programs.government health programs.Stark Law violations are a Stark Law violations are a civil civil violation. No violation. No intent to violate the law is necessary.intent to violate the law is necessary.

What to Watch Out ForWhat to Watch Out For

Danger Areas:Danger Areas: State Stark Laws (“Mini-Stark”) – Some State Stark Laws (“Mini-Stark”) – Some

state laws are broader than federal lawsstate laws are broader than federal laws Joint Ventures or questionable contracts Joint Ventures or questionable contracts

with referral sourceswith referral sources Arrangements permitted under the Anti-Arrangements permitted under the Anti-

Kickback Statute, but not StarkKickback Statute, but not Stark Purchased Services that do not comply Purchased Services that do not comply

with Anti-Markup Provisionswith Anti-Markup Provisions

If You Think You Need HelpIf You Think You Need Help

Philip M. Sprinkle IIPhilip M. Sprinkle IIBalch & Bingham, LLPBalch & Bingham, LLP

30 Ivan Allen Jr. Blvd. NW30 Ivan Allen Jr. Blvd. NWAtlanta, Georgia 30308Atlanta, Georgia 30308

(888) 360-9093(888) 360-9093psprinkle@balch.compsprinkle@balch.com