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Within the healthcare industry, no United States Congressman is better known, more frequently vilified and more capable of raising alarm than California Congressman Pete Stark.

Stark, a self-professed atheist, is said to be proud of his reputation of having uttered more outrageous comments on the House floor than any other Congressman.
He is also the person for whom the “Stark Law” - a law intended to prevent conflicts of interest by physicians who treat medicare and medicaid patients - is named.

That law, which now has three phases, has been in a constant state of refinement since 1992, imposes restraints upon physicians with which they absolutely must be familiar.

The Stark Law has been said to be “related to, but not the same as, the federal anti-kickback law.” You don’t have to be a physician to violate the anti-kickback law, but you do for the Stark Law to get you. And, under the anti-kickback law, it doesn’t matter whether medicaid and/or medicare is involved.

And, it’s small consolation, but, while facing enormous monetary loss, one who violates the Stark Law is not in danger of the jail time facing one who violates the anti-kickback law. They do, however, face a civil monetary penalty of up to $15,000, must repay any amounts wrongly billed and collected, and they face exclusion from Medicare in any case “where a person submits an improper claim . . . . . . that such person knew or should have known was provided through a prohibited referral or who has not refunded the payment.”

Penalties up to $100,000 are provided for so-called “circumvention schemes” wherein a physician or other entity “enters into an arrangement or scheme (such as a cross-referral arrangement) which the entity or person knew or should have known had the principal purpose of assuring referrals, which if they had been directly made would have been prohibited.”

The law, of course, includes many exceptions, too numerous to discuss, and applies only to Designated Health Services (DHS), which are defined as (1) clinical laboratory services; (2) physical therapy services; (3) occupational therapy services; (4) radiology services, including magnetic resonance imaging (MRI), (5) computerized axial tomography (CAT) scans and ultrasound services; (6) radiation therapy services and supplies; (7) durable medical equipment (DME) and supplies; (8) parental and enteral nutrients, equipment and supplies; (9) prosthetics, orthotics, and prosthetic devices and supplies; (10) home health services; (11) outpatient prescription drugs; and (12) inpatient and outpatient hospital services.

The incentive for Phase 1 of the Stark Law was a desire to prevent physicians from profiting from self-referral for Medicare patients. It was aimed at referrals for clinical laboratory services. The law’s authors’ believed such referrals would led to over-utilization, thus driving up the cost of health care.

(In 1989, a department of the United States Department of Health and Human Services (DHHS) completed a study which reported that “patients of referring physicians who owned or invested in independent clinical labs received 45% more lab services than Medicare patients in general and 34% more services directly from clinical labs than Medicare patients in general,” DHHS claimed the “over-utilization cost Medicare about $28 million in 1987.

Stark 11 expanded the law to include Medicaid as well as extending its applicability to additional health services. Many argue that Phase 11 intruded too far into the practice of medicine, obstructed the ability of physicians to participate in managed care networks, and failed to recognize the realities of the ever-changing nature of the healthcare industry.

Stark 111 was scheduled to go into effect December 4, 2007, but was delayed until March 26, 2008.

From inception, “self-referral” under the Stark Law has been “the practice of a physician referring a patient to a medical facility in which he has a financial interest, be it ownership, investment, or a structured compensation arrangement.”

The Congressional Research Service explains that an ownership or investment interest may be through “equity, debt, or other means.”

It is impossible to fully outline the Stark Law in a way that everyone can apply to their situation. This is an area where individual advice as to the specifics of one’s practice, business structure and various relationships is necessary.



Charles Farmer
Spragins, Barnett & Cobb, PLC
731-424-0461
cfarmer@spraginslaw.com
www.spraginslaw.com


May 2008


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