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Stark Act is a piece of legislation that prevents physicians from self-referral. The Stark Act prevents physicians from referring patients to other clinics for designated health services that are funded by Medicare if the physician or their immediate family member has a financial association with the clinic. The Act also prohibits the clinic for charging Medicare, a third party, or any individual for services resulting from the self-referral. Due to the complexities of the Stark Law, and the various exceptions that apply, DHS clinics and physicians are advised to consult a lawyer to determine their compliance with the Stark Law.
Designated Health Services
Firstly, it is worth noting that the Stark Act prevents referrals to clinics for a DHS. These services include:
Who is Immediate Family?
Physicians should note that the financial relationships-direct or indirect-of immediate family members will be used to determine the legality of a referral. Immediate family members refer to one’s husband, wife, birth parent, adoptive parent, sibling, child, in-laws, and grandchild or grandparent.
What Qualifies as a Financial Relationship?
According to the Stark Law, a financial relationship means a direct/indirect investment interest, ownership interest, or a compensation agreement with a health provider that offers DHS. A direct financial relationship occurs when the compensation or investment interest passes through a referring physician or a member of their immediate family and the clinic offering DHS without any third parties. Therefore, a referring physician may be linked to a DHS clinic through a family member.
Penalties for Violating the Stark Act
Physicians or entities liable for violating the Stark Act face a civil penalty amounting to $100,000. Furthermore, a clinic or entity accused of breaching the Act may be denied payment by Medicare. A physician or entity willing to determine whether they comply with the Stark Act can either contact an attorney or request the Centre for Medicare and Medicaid Services (CMS) for an advisory opinion. These opinions have legal implications on CMS and the requesting party and assure a physician or DHS entity should they be wrongly incriminated.
Distinction between the Stark Act and the Anti-Kickback Law
The Anti-Kickback Law is similar to the Stark Act only that it imposes more severe penalties on physicians or entities that violate its provisions. According to the Anti-Kickback Law, it is a felony to receive any kind of payment for referring patients to another entity for Medicaid or Medicare services. The law further prohibits payment for leasing, ordering, or purchasing any service, facility, or item that is paid for under Medicaid or Medicare. A violation of the Anti-kickback law results in a felony conviction of five years imprisonment and/or a fine of not less than $25,000. The law prohibits the payment and receipt of a kickback.
Safe harbors of the Anti-Kickback Law
The Department of Health and Human Services along with Congress has laid out several “safe harbors” or exceptions to the Anti-Kickback law. These include space rental, equipment rental, and referral services.
The Anti-Kickback law prohibits specific leasing arrangements. However, due to the strain that this could place on health care services willing to find somewhere to set up their practice, there is a safe harbor for space rentals. The safe harbor requires a lease to be written, specify the premises leased between parties, be one year old, be leased for a fair market value, and cover reasonable space. The rent should not reflect the value or volume of referrals for Medicaid/Medicare services.
Many entities consider it more affordable to rent than to own equipment. HHS also provides a safe harbor for renting equipment. The same conditions applicable to space rental lease apply to equipment lease.
HHS also has a safe harbor covering payment to referral services. The payment cannot be based on value or volume of referrals but on the operating costs of the referral service. There should be no restrictions on the way in which these referred services are provided. Additionally, a referral service should make certain disclosures to the person seeking a referral and indicate these disclosures in writing.