Part 2: Laws Every Physician Should Know

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Robert Oubre, MD
November 23, 2024 • Estimated Reading Time: 10 minutes

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Today we’re talking about the Stark Law!

…no not that Stark. Way less exciting. It’s also called the physician self-referral law.

We’ll get back to that.

But first, this is Part 2 of my series "Laws Every Physician Should know.” Part 1 was about The False Claims Act. Physicians, if staying out of federal prison isn’t enough of a motivation to be familiar with these laws, you’ll also likely see questions on them during your USMLE or board exams.

And as luck would have it, I happened to see a post on Twitter that was an example of “avoiding the red flag” (which I discussed in my last newsletter). Check out my response, and the questions that followed, here:

So before we get to the not-about-iron-man law, we need to discuss another one first.

The Anti-Kickback Statute (AKS)

“…a criminal law that prohibits the knowing and willful payment of "remuneration" to induce or reward patient referrals or the generation of business involving any item or service payable by the Federal health care programs (e.g., drugs, supplies, or health care services for Medicare or Medicaid patients). Remuneration includes anything of value and can take many forms besides cash, such as free rent, expensive hotel stays and meals, and excessive compensation for medical directorships or consultancies.

As a physician, you are an attractive target for kickback schemes because you can be a source of referrals for fellow physicians or other health care providers and suppliers. You decide what drugs your patients use, which specialists they see, and what health care services and supplies they receive.”

US Department of HHS Office of Inspector General

(The OIG bolded that section for physicians, not me)

I asked Sean Weiss, The Compliance Guy, to help me explain AKS simply:

“…it’s a federal law that prevents healthcare providers from offering or accepting bribes, gifts, or anything of value in exchange for referring patients to other healthcare providers, essentially prohibiting “kickbacks” to incentivize patient referrals for services covered by Medicare and Medicaid, ensuring medical decisions are based on patient needs, not financial gain.

  • Purpose: To protect patients by ensuring that healthcare providers make medical decisions based on what’s best for the patient, not financial incentives

  • What it prohibits: Offering or receiving any “thing of value” (like money, gifts, free services) to induce or reward patient referrals

  • Who is covered: Doctors, hospitals, pharmacies, medical device companies, and anyone involved in providing healthcare services covered by federal health programs.

  • Intent matters: To be considered a violation, the act of offering or receiving a kickback must be done “knowingly and willfully".”

  • Example of a violation: A pharmaceutical company offering expensive gifts to doctors in exchange for prescribing their medication more often.”

And, yes, this is a federal criminal penalty so you can go to jail for it. The penalty may also include up to $50,000 per kickback PLUS 3x the amount of the payment received.

Ok, next.

The Physician Self-Referral (Stark) Law

“…prohibits physicians from referring patients to receive "designated health services" payable by Medicare or Medicaid from entities with which the physician or an immediate family member has a financial relationship, unless an exception applies. Financial relationships include both ownership/investment interests and compensation arrangements. For example, if you invest in an imaging center, the Stark law requires the resulting financial relationship to fit within an exception or you may not refer patients to the facility and the entity may not bill for the referred imaging services.

The Stark law is a strict liability statute, which means proof of specific intent to violate the law is not required.

US Department of HHS Office of Inspector General

In short, it prevents physicians from having financial relationships with healthcare entities if they or their family members have a financial stake in that entity.

“Designated health services” includes:

  • clinical laboratory services

  • outpatient PT/OT/ST services

  • radiology or other imaging services

  • radiation therapy services and supplies

  • DME and supplies

  • parenteral and enteral nutrients, equipment, and supplies

  • prosthetics, orthotics, and prosthetic devices and supplies

  • home health services

  • outpatient prescription drugs

  • inpatient and outpatient hospital services

So, an example here might be a physician that refers Medicare patients to a home health agency that either they (or their immediate family member) own.

These laws make sense. A physician should do what is best for the patient, period, free of financial bias.

They should let the patient choose which lab to get their blood drawn or refer to a certain imaging center because they’re the most efficient - not because they’re getting paid for each referral.

Or let’s say you have two competing hospitals in town. One is known for less-than-ideal care and their inpatient numbers are dwindling. They can’t pay outpatient providers an extra bonus for admitting to their hospital.

Or a SNF (skilled nursing facility) can’t give hospitalists who refer a threshold number of patients to them in a year a big free steak and lobster dinner for them and their families.

You get the picture.

But you might think, “Now wait a minute, aren’t large health systems, with their ambulatory surgical centers (ASCs), technically violating these laws?”

That’s where safe harbors come in.

What Are Safe Harbors?

Safe harbors protect certain payment and business practices that could otherwise violate these laws. They protect “rental agreements, investments in ambulatory surgical centers, and payments to bona fide employees.”

So, for example, it would protect a surgeon who is part-owner of and performs procedures at an ASC when they get percentages of the facility fee (on top of their professional billing). But the arrangement “must fit squarely in the safe harbor and satisfy all of its requirements” which can be found here. One of those requirements is that the surgeon must be operating at the ASC.

The government acknowledges how these relationships can extend beyond just money exchanged. To that end, they have an EHR safe harbor regulation. Essentially, hospitals that donate EHR software services to physicians are protected if (amongst others):

  • The donation is used to enhance patient care (an easy argument when it supports continuity)

  • The recipient pays at least 15% of the cost of the EHR

You can see how the relationship could be muddied by “we provide your EHR, and you preferentially admit to us.” So, stipulations were put in place.

The Exclusion Statute

Lastly, if I haven’t painted enough of a rosy picture with the threat of jail time or failing your board exams, there’s also the cherry on top called the exclusion statute.

If you are convicted of:

  • Medicare or Medicaid fraud

  • Patient abuse or neglect

  • Felony convictions for other health-care-related fraud, theft, or other financial misconduct

  • Felony convictions for unlawful manufacture, distribution, prescription, or dispensing of controlled substances,

the OIG is legally required to exclude you from participation in all Federal health care programs. That means:

  • Medicare, Medicaid, and others (such as TRICARE and the VA) will NOT pay for your services

  • Your services can’t even be billed indirectly through an employer or group practice

  • Even if you see patients as private-pay, orders or prescriptions that you give to patients will not be reimbursable by any federal health care program.

And, when that occurs, private payers are also likely to follow suite. It’s essentially the death-sentence for your ability to practice medicine.

Quite the note to end on…well…happy Thanksgiving week, everybody!

Cheers,

Robert

Thanks to Sean Weiss and Laura Samson, RN BSN CCDS for editing this newsletter!

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