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Physicians are prohibited from participating in any type of self-referral. This means they are not permitted to refer patients to other healthcare providers for services funded by Medicare when they or their family member have a direct or indirect financial relationship with the recommended healthcare provider. This is covered in an amendment to the Social Security Act and is known as the Stark Act.
This law provides severe criminal penalties for anyone who violate its provisions. This law makes it a felony for an individual to get any form of payment as a result of referring a patient to a particular Medicaid or Medicare healthcare service provider. It also makes it illegal to be given any form of payment for ordering, leasing, purchasing any type of goods, service or facility item that is paid for because of utilizing Medicaid or Medicare services. Should a person receive a felony conviction for violating this law, they could receive a fine of up to $25,000 as well as incarceration for up to five years. Each side of these illegal transaction can be found guilty of violating this law. Any type of receipt of an illegal payment or offering an illegal payment can be prosecuted under the anti-kickback law.
There is a difference between the Anti-Kickback Law and the Stark Act. It’s important to know that a violation of the Anti-Kickback statute is a criminal offense. The Stark Act is not a criminal law and only applies to healthcare providers. The Anti-Kickback statutes apply to individuals in any industry.
Safe Harbor Transactions
The Department of Health and Human Services (HHS) working in conjunction with the U.S. Congress have created safe harbor transactions. These transactions make it possible in a variety of situations to avoid prosecution under the Anti-Kickback law. The goal of creating Safe Harbor Transactions was to exclude specific transfers and arrangements from being identified as illegal.
This covers payments made to encourage a healthcare practitioner to join with a healthcare organization. There are many conditions that need to be met for this type of transaction to be a Safe Harbor Transaction.
With this exemption, an entity must possess under $50 million is assets connected to the furnishing of healthcare services and items. There are certain restrictions that cover ownership of these interests. These exemptions are available in locations that are underserved with regard to healthcare. It covers dividends or interest not being designated at payments.
This is possible only if it is not based on value or volume of referrals. It can only be a cost of operating a referral service. Each referral requires that certain disclosures concerning a person seeking the referral be followed. This includes a written record that details all of the disclosures and more.
It is possible to make payments to agents. These are individuals authorized to act on behalf of another person. The stipulations are that the agency agreement must be in writing. It must detail all services an agent is to provide. The agreement must be under twelve months in length. The services provided must be paid for at fair market value. The amount must be determined in advance.
This requires the lease to be in writing. It must cover each premise leased between the parties. It must specify the lease for the premise(s) be for a minimum twelve months. The rent must be paid at fair market value. The monthly lease amount needs to be determined in advance. The space leased can’t be more than what is reasonably necessary to provide healthcare services.
This makes it possible for healthcare providers to legally rent rather than own their equipment. Many forms of modern healthcare require very expensive and technically complex equipment to provide a variety of services. The equipment rental agreements must follow the same standards as those agreements utilized for leasing space.
Healthcare providers who want to be in compliance with the Stark Act need to understand what is a direct or indirect financial relationship. The definition of a financial relationship under this Act involves a direct or indirect ownership interest, investment interest in an entity that furnishes Medicare services. It also covers any compensation relationship involving such services. Even if a healthcare provider is not providing the Medicare service, they may still have a direct financial relationship with the entity providing it.