The Stark Act, 42 U.S.C. § 1395nn, prohibits a physician from making a referral to an entity for the furnishing of designated health services for which Medicare or Medicaid payment may be made if the physician has a financial relationship with the entity. Designated health services that are subject to this referral prohibition include clinical laboratory, physical and occupational therapy, radiology, radiation therapy and supplies, durable medical equipment, parenteral and enteral nutrition, prosthetics orthotics and prosthetic devices, home health, outpatient prescription drugs, and inpatient and outpatient hospital. A financial relationship includes both ownership and compensation arrangements. If a physician has a financial relationship with an entity that provides designated health services, either the physician will be prohibited from referring to the entity or the financial relationship must meet an exception.
The regulations promulgated under Stark contain more than 30 exceptions. These exceptions include, among others, in-office ancillary services, rental of office space and equipment, bona fide employment relationships, personal service arrangements, physician recruitment and non-monetary compensation up to $300. Each exception has multiple elements that must be fulfilled completely to take advantage of the exception.
Besides being a very complicated law, why is the Stark Act so important for health care providers? Simply stated, Stark is a strict liability statute. If the Stark Act is implicated (if you have a physician who has a financial relationship with an entity that provides designated health services to which the physician will refer), you must meet an exception, in all respects, or the entity billing for the service can be assessed a civil monetary penalty up to $15,000 for each service billed, plus two times the reimbursement claimed, and can be excluded from Medicare and Medicaid participation. Furthermore, if the physician and the entity implemented a circumvention scheme, civil money penalties up to $100,000 and exclusion can be imposed upon the persons who entered into the scheme.
Baker & Daniels and affiliate B&D Consulting have experience in representing clients involved in the Stark Act.
To view the text of the Stark Act, click here (requires Adobe Acrobat Reader ).
For a PowerPoint Presentation on the Stark Act, click here (1.4mb).
For additional information from CMS on the Stark Act, see: http://www.cms.hhs.gov/MLNProducts/40_PhysSelfReferral.asp.
For the Phase II Regulations, see: http://www.cms.hhs.gov/quarterlyproviderupdates/downloads/cms1810ifc.pdf.
For the Phase III Regulations, see:
http://edocket.access.gpo.gov/2007/07-4252.htm