Tag Archives: Stark Law

FY 2014 Budget Recommends Removing Therapy From In-office Ancillary Services

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via apta.org – – – APTA is highly encouraged by the proposal within President Obama’s fiscal year 2014 budget, released yesterday, to exclude therapy services, including physical therapy, along with radiation therapy and advanced imaging from the in-office ancillary services (IOAS) exception of the Stark self-referral laws.

The Office of Management and Budget concluded that closing the loophole for these services would provide a savings of $6.1 billion over the standard 10-year budget window, providing further evidence that these self-referral arrangements lead to overutilization of Medicare services and should be addressed by Congress.

On its own for many years and more recently as part of the Alliance for Integrity in Medicare (AIM) coalition of medical specialty, laboratory, radiation oncology, and medical imaging groups, APTA has long advocated for exclusion of physical therapy from the IOAS exception. APTA agrees with the Administration’s proposal on physician self-referral and believes this issue should be addressed as part of any fundamental delivery system reform.

APTA and its AIM partners continue to be gravely concerned about the ongoing misapplication of the IOAS exception to the physician self-referral law, believing this loophole results in increased spending, unnecessary use of medical services, and potentially compromised patient choice and care. Studies published by the New England Journal of Medicine, Health Affairs, and the Government Accountability Office, among others, have highlighted abuses that result from physician self referral. These ongoing issues serve only to erode the integrity of the Medicare program and undermine patient care.

APTA and AIM now strongly urge the 113th Congress to follow the recommendations of the Administration budget and pass legislation to remove physical therapy, advanced diagnostic imaging, anatomic pathology, and radiation therapy from the IOAS exception.

 

The Stark Law Regulations: A Review

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The Stark Regs (1) forbid doctors and their immediate family members from referring their patients to businesses they own which provide “designated health services,” and (2) contains a long list of permitted financial relationships between health care providers.  The list of what constitutes a “designated health service” (DHS) includes PT, rehab, diagnostic imaging, clinical lab, DME, and home health.  A “physician” means an M.D., D.O., chiropractor, podiatrist, optometrist or dentist.  An “immediate family member” is a husband or wife; birth or adoptive parent, child, or sibling; stepparent, stepchild, stepbrother, or stepsister; father-in-law, mother-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law; grandparent or grandchild; and spouse of a grandparent or grandchild.  In short, if you or your family member owns a DHS, don’t refer to it.  Unless of course your situation falls within one or more of the gazillion exceptions.

A few key changes from the third set of revisions (so called Stark III) which affect physicians are helpful to keep in mind.  For instance, the way fair market value of physician compensation is determined  in the Stark II regs has been simplified and now depends on an amorphous consideration of the transaction, its location and other factors.  The clear formulas contained in Stark II was dropped and this makes the need for an expert FMV study even more compelling. Continue reading →

Hospital Physician Recruitment on the Rise Again

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In an effort to stay competitive, hospital physician recruitment deals are on the rise.  These arrangements are permitted under applicable federal law (the Stark Law) and are a core tool in hospitals’ tool chest.  These arrangements generally involve the hospital “loaning” to the physician or to a practice employing the doctor the costs associated with that doctor joining.  Since the ramp up costs associated with hiring or a physician just relocating to a new community can be steep (especially as payer contracts can take many months to set in place), hospital financial assistance can be critical.  How do they work?  Simple—

1.The hospital guarantees, based in part on MGMA salary surveys and other cost data sources, that the physician will collect at least $X each month for a period of normally up to 12 months;

2.The doctor agrees to remain in the hospital’s service area for 2-3 years, during which time, the amount loaned by the hospital is forgiven.

Though it may sound too good to be true, there are drawbacks, including:

1.There are pretty severe limitations placed on noncompetes for hospital recruited physicians which can be daunting to practices hiring them;

2.Unless carefully worded and negotiated, recruited physicians may find themselves with high expectations and little delivered in terms of the marketing and other support required to create a successful practice.  Not being financially successful is no defense to the requirement of staying in the hospital community for several years to write off the loan;

3. Some hospitals offset their business risk by taking any excess earnings (the collections exceeding the guaranteed amount) for months after the 12 month guarantee period, a period when collections should be substantially higher than during the early phases of the recruitment.

Practices entering into a hospital recruitment arrangement need to be careful in their physician contracts to pass as much financial risk as possible to the recruited doctor.  A recruited doctor that decides he or she no longer likes the new community can leave the practice holding the bag for a huge amount of money which has not yet been forgiven.

Recruited physicians need to be careful about the risk passed off to them in their employment contracts if they are joining an existing practice, since the practices typically benefit by receiving enough money to cover all of the new physician’s salary, benefits and overhead.

Fraud & Abuse Enforcement Soars Sky High

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Investigations and successful prosecutions for violation of laws like the Anti Kickback Statute (“AKS”), the Stark Law and the False Claims Act were dramatically up in 2011 and are expected to climb still higher in 2012. For instance 13 doctors were charged in December, 2011 with violating the AKS by receiving payment for referring patients to an MRI center. Physicians and other healthcare business people MUST have any suspect arrangement closely scrutinized by highly qualified counsel. A “suspect arrangement” is any arrangement between providers of healthcare services that involve, to any degree, the exchange or payment of anything of value, including money. The AKS is a criminal statute; and the risks of enforcement are now huge.
Business and arrangements which are designed at all to lock in physician referrals carry particularly large risks and require close scrutiny. For instance, surgery centers that received referrals from non-owner physicians viewed that as a great thing. Now, referrals from unaffiliated physicians are viewed as inherently suspect. “What,” the regulator thinks, “is driving this referral? What wrongful conduct is being engaged in here?” This is especially so with any marketing arrangement as well.

Physicians and other healthcare business people would do well to recall that if even “one purpose” of the arrangement is to compensate (cash or anything of value) someone for a patient referral, the AKS is triggered. Moreover, where Safe Harbor Act compliance was recommended, many now find it necessary.


New Appeals Court Decision Streamlines Stark Challenge

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Normally, challenges to healthcare related regulatory changes have to jump through an administrative hoop before they can file suit.  They can’t just run to court.  They have to go through CMS first and allow CMS the opportunity to justify the new regulation.  A recent appellate court ruling changes this.

The Council for Urological Interests (CUI) is a national organization of physician-owned joint ventures.  As many readers know, for instance “under arrangement” lithotripsy services, for instance, are a common joint venture type business for urologists to be engaged in.  The CUI filed suit in response to 2008 changes to the Stark Law, which would have interfered with certain urology-centered joint venture businesses, but the lower court dismissed the suit because the CUI was first required to go through “administrative review” required by the Medicare Act.  The appellate court disagreed and agreed to hear the CUI suit.  The case should make it easier to file legal challenges in response to regulatory changes, like Stark Law developments.

The case is also important because the Stark Law change in 2008 (effective in 2009) made it difficult (impossible in some instances) for physicians to act as service providers to hospitals.  These “under arrangement” transactions were ok because the hospitals billed for the “designated health services,” not the doctors.  The Stark Law change, effective in October, 2009, interfered with such relationships (between physicians and hospitals) by determining that the “under arrangement” providers were actually providing the service (even though the hospital, not the doctor entity, billed for the service).

Though the jury is still out on the substance of the CUI lawsuit (whether the Stark changes are unlawful), the case will pave the way for more legal challenges of this type.


Consignment Closets: Still a Viable Option for DME Providers

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In the age of heightened regulatory scrutiny, physicians and other health care providers often question whether “Consignment Closet” relationships are legal.  If properly structured these arrangements are not only legal but are of great benefit to patients needing valuable medical devices.  A properly structured relationship will, in all probability, withstand a regulatory challenge by the Office of Inspector General or from other regulatory authorities. Continue reading →

Innovative Surgery Center Arrangements

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While surgery centers generally follow the guidelines set forth in the federal Safe Harbor to the Anti Kickback Statute (AKS), not all do. In fact, there are some creative arrangements worth considering.

Some centers do not perform services which are compensated in any way by a state or federal healthcare program. As such, they don’t have to comply with the usual federal laws (e.g. AKS and Stark). That leaves the center to comply only with state regulation, which is usually far less restrictive than the federal laws. This works if the center intends, for instance, only to do work pursuant to Letters of Protection (LOP) or bodily injury suits. Though the pool of patients is very different in this type of center, the lid is nearly off when it comes to how creative the arrangements among the owners and referring physicians can be.

One of the more vexing challenges among all surgery centers is ensuring patient referrals by owner surgeons. While most centers will simply follow the federal Safe Harbor “one third test,” other centers go further and do things like: (1) making loans to owner surgeons, (2) creating “put” or “pull” periods during which time an investing physician can buy back out or be bought back out, and (3) even making exceptions to the restrictive covenants commonly contained in ASC documents.

Complying with the federal Safe Harbor applicable to surgery centers is clearly the most conservative way to go, in terms of regulatory compliance, since compliance means immunity from AKS violations. That said, Safe Harbor compliance is a little like horseshoes: coming close counts. The simple reason is that Safe Harbors are examples of conduct that complies with the AKS, but they are not all encompassing. There may be arrangements that do not violate the AKS which are simply not described in the Safe Harbors. Simply put, there are many other creative arrangements commonly employed in surgery centers. Since surgery center ownership and referral arrangements are hotly regulated, owners must be careful when considering veering off the straight course provided by federal law.


U.S. DISTRICT COURT RULING STRENGTHENS STATE STARK LAW

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Most readers know that the federal Stark Law deals primarily with matters involving physician self referral. The state equivalent, the Florida Patient Self Referral Act of 1992, has provisions that are even tougher than the Stark law. For instance, the Stark law allows some physicians to refer to renal dialysis centers in which they have an ownership interest, but the Florida law does not. Fresenius, a provider of renal dialysis services, filed suit seeking a declaration that the federal law (and not the state law) should control on the issue. Since there are several key areas where state law is more stringent than federal law (e.g. supervision requirements and ownership of entities that don’t provide “designated health services”), many eyes were on the court. Instead of giving Fresenius a pass and saying “Florida can’t make it tougher than what the federal law says,” the court stated that the federal laws do not preempt (supplant) the state ones.

Since the Stark Law does not preempt the state law and since the state law does not violate the U.S. Constitution, business people and professionals will have to make sure that both layers of compliance (state and federal) and solidly in place.