Stark Act and Anti-Kickback Laws

A ‘self referral’ occurs when a physician refers a patient to another health care facility that the physician, or an immediate family member, has a financial interest in. Under the Stark Act, self referrals are not allowed when referring patients for Medicare-payable designated health services (DHS). Although the act itself is prohibited, if a self referral does occur, the entity providing services is not permitted to bill Medicare, or any other individual or entity. Violating these rules can result in costly, lengthy consequences. However, some exceptions do exist.

The Stark Act only applies to self referrals for designated health services (DHS). However, designated health services cover just about every available service, including:

  • Physical and occupational therapy
  • Clinical laboratory services
  • MRIs, CAT scans, and Ultrasounds
  • Radiation therapy
  • Durable medical equipment
  • Parenteral / enteral nutrients
  • Prosthetic and orthotic devices
  • Home health care
  • Prescription drugs
  • Inpatient and outpatient hospitalization

What Constitutes Financial Interest?

If the physician or an immediate family member has a direct or indirect financial relationship with another health care facility, he or she is prohibited from referring patients to that facility for certain services. A financial relationship exists if the physician has ownership or investment interest in the entity, or is involved in any type of compensation arrangement. Ownership or investment interest in a DHS facility includes the receipt of certain stock options, equity and debt, and partnership interests in an LLC.

The financial relationship is considered ‘direct’ if the compensation or interest passes directly to the physician or an immediate family member. Even if a physician has no direct contact with the entity, he or she may still be prohibited from referring patients for DHS if an immediate family member benefits. Who is considered an immediate family member? For the purpose of this discussion, an immediate family member is defined as “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.”

What is the Anti-Kickback Law?

The Anti-Kickback law is a decidedly more severe version of the Stark Act. In fact, under this law it is a felony to receive payment for patient-referrals for services covered by Medicare and Medicaid. In addition to felony charges, violating the Anti-Kickback law is also punishable by fines of up to $25,000 and five years in jail. Both receipt and payment of the kickback are forbidden. Physician-referral practices have come under intense scrutiny recently, especially after a number of high-profile whistleblower cases have uncovered unprecedented levels of physician-referral fraud.

Safe Harbor Transactions - Exceptions to the Rule

There are certain ‘safe harbor’ transactions which exempt an otherwise prohibited act from being in violation of the Stark Act and Anti-Kickback laws. However, these exceptions are highly specific and often require upfront documentation and permission to make the exemption valid.

Investment interests may be exempt from violating the Stark Act or Anti-Kickback laws if they meet the following criteria:

  • The entity has less than $50 million in assets
  • The entity is located in an under-served area

Other exceptions may apply, such as for referral services and payments made to employees. For example, a referral service is protected under a safe harbor as long as it bills only for the cost of running a referral service, not for the volume or value of referrals.

Altman & Altman, LLP - Whistleblower Lawyers Serving All of New England

If you are aware of physician-referral relationships that are in violation of the Stark Act or the Anti-Kickback laws, Altman & Altman, LLP can help you determine if action needs to be taken. We understand the sensitive nature of whistleblower claims, and we will take every step to ensure that the process is as smooth as possible. This type of fraudulent activity costs everyone, and often occurs at the expense of the health and wellbeing of the general public. By coming forward, you can help ensure that physicians and vendors are held to the highest standards. Contact Altman & Altman, LLP today for a free consultation.

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