BILL COPELAND’S HEALTH LAW INSIGHTS

Last month, I discussed the requirements to comply with physician recruitment guidelines under the Medicare and Medicaid anti-kickback statute safe harbors. This month, I will address the exception to the federal anti-referral legislation, the so-called "Stark Law."

One of the great misconceptions in the health care industry is that the Anti-Kickback Statute and the Stark Law are the same. They are not! While they refer to each other regarding specific issues, the two laws address different concepts. The Anti-Kickback law prohibits payment for referrals; the Stark Law prohibits referrals to a clinical laboratory or for designated health services¹ where the physician has an ownership interest in or a compensation arrangement with the referral facility.

As stated by the OIG: Compliance with a Stark law exception does not immunize an arrangement under the anti-kickback statute. Rather, the Stark law sets a minimum standard for arrangements between physicians and hospitals. Even if a hospital-physician relationship qualifies for a Stark law exception, it should still be reviewed for compliance with the antikickback statute.²

The remedy for violation of the Stark Law is denial of Medicare or Medicaid payment. However, in three situations, the Secretary of Health and Human Services may impose civil monetary penalties and/or exclusions from the Medicare and Medicaid programs:

1. where a person knows or should know that an improper claim has been made or where a refund has not been made (penalty of up to $15,000 for each prohibited service provided);
2. where a person knows or should know that the purpose of the arrangement is to circumvent The Stark Law (penalties of up to $100,000 for each scheme); and
3. for false reporting under the Stark Law (penalty not to exceed $10,000 per day).

The implementing regulations provide several exceptions to the Stark Law’s mandate.³ One of those exceptions is for physician recruitment.

The Stark Exception for Recruiting Physicians

Under the Stark Law, physician recruitment is included under the exceptions to the referral prohibition related to compensation arrangements. The rule is long and very complicated, and I will not reproduce it here. However, the key components of the rule are:

1. The arrangement must be set out in writing and signed by the parties.
2. It cannot have conditions for referrals.
3. The volume or value of referrals is not the basis for remuneration.
4. There can be no restrictions of the physician establishing privileges or making referrals to any other hospital.
5. The physician must relocate his practice at least 25 miles from the original location.
6. At least 75 percent of the physician's revenues must come from care provided to new patients.
7. Residents and physicians who have been in practice less than one year are eligible for the exception even if they do not move their practices, but the recruited resident or physician must establish his or her medical practice in the geographic area served by the hospital.
8. For payments made either indirectly such as payments made to another physician or physician practice, or directly to a physician who joins a physician practice, there are additional conditions:
   1. The written agreement must also be signed by the party to whom the payments are directly made;
   2. Except for actual costs incurred by the physician or physician practice in recruiting the new physician, the remuneration is passed directly through to or remains with the recruited physician;
   3. The costs allocated by the physician or physician practice to the recruited physician can not exceed the actual additional incremental costs attributable to the recruited physician;
   4. Records of these costs and the passed through amounts are maintained for at least 5 years;
   5. The remuneration from the hospital shall not to be determined by the volume or value of any actual or anticipated referrals by the physician or the physician practice;
   6. The physician or physician practice may not impose additional practice restrictions on the recruited physician other than conditions related to quality of care; and
   7. The arrangement does not violate the anti-kickback statute.

Despite a lot of rhetoric from the Office of the Inspector General relating to recruiting physicians, I could find no enforcement actions within the last three years. However, given the comments on the subject in the recent Compliance Guidance, the arrangements are clearly under the microscope. Experienced legal counsel for both the entity and the targeted physician should carefully review any recruiting activity by health care entities.

Rules for the Adoption of Electronic Prescribing and Electronic Health Records.

On August 1, 2006, CMS and OIG released final rules regarding the adoption of electronic prescribing and electronic health records. Under the rules, there are two new exceptions to the Stark Law two new anti-kickback safe harbors.

These rules establish certain conditions allowing hospitals and other healthcare entities furnishing designated health services to provide physicians and others with hardware, software, or information technology and training services used solely for electronic prescribing. A detailed analysis of these conditions is available from the CMS Office of Public Affairs Fact Sheet at: http://www.cms.hhs.gov/apps/media/press/release.asp?Counter=1920

¹In addition to clinical laboratory services, there are ten designated health services, including: (1) physical therapy services, (2) occupational therapy services, (3) certain radiology services, (4) radiation therapy services and supplies, (5) durable medical equipment and supplies, (6) parenteral and enteral nutrients, equipment, and supplies, (7) prosthetics, orthotics, and prosthetic devices and supplies, (8) home health services, (9) outpatient prescription drugs and (10) inpatient and outpatient hospital services.
²70 Fed. Reg. 4863 (Jan 31, 2005)
³66 Fed. Reg. 856 (Jan. 4, 2001); 69 Fed. Reg. 16054 (Mar. 26, 2004).
⁴Medically Underserved Populations (MUPs) may include groups of persons who face economic, cultural or linguistic barriers to healthcare.
⁵42 CFR 1001.952(n)
Source: DHHS, HRSA, Bureau of Health Professions.

Copyright 2006 William Mack Copeland. You can reprint any part of this newsletter by providing the following acknowledgement: "Reprinted with permission. William Mack Copeland, www.wmcopeland.com."