Published: 2009-12-09 16:19:26
Author: Wendy Wysong | Corporate Compliance Insights | December 7, 2009
Introduction: Health care providers, whether physicians or hospitals, should be critically reviewing their longstanding financial relationships to ensure compliance with recent revisions to the federal self-referral restrictions under the Stark and the Anti-Kickback laws.
The practice of a physician referring a patient to a hospital or clinic in which she or he has a financial interest is governed by a federal law, known as Stark. Various remuneration plans offered to induce or compensate physicians for program referrals are governed by another federal law, the Anti-Kickback law. While related, the laws are targeted at different conduct, have different levels of required intent for liability, and have different penalties.
Since their inception, both laws have provided exceptions to accommodate legitimate business arrangements and “safe harbors” for activities not subject to enforcement if certain conditions are met. However, recent revisions have narrowed the exceptions at the same time that new self-reporting requirements have come into play. Proposed healthcare reform bills have also threatened some of the exceptions. Increasingly aggressive enforcement, as well as “voluntary” disclosures forced by internal due diligence investigations, have heightened the risk of non-compliance. Further heightening the risk is the appeal of monetary rewards for whistleblowers in these difficult economic times.
As the attention intensifies, physicians and hospitals must now actively review their contracts and leases to ensure that formerly compliant practices do not now run afoul of these laws.
Self-Referral: The laws and regulations known as Stark I, II, and III, after Congressman Fortney “Pete” Stark, (42 U.S.C. § 1395nn), prohibit referrals of Medicare or Medicaid patients for certain “designated health services” to a entity in which a doctor or immediate family member has a direct or indirect ownership interest or compensation arrangement. Nor can the entity bill Medicare or Medicaid for services provided pursuant to an illegal referral.
However, there are exceptions for such items as “in-office ancillary services,” which allow members of a physician group practice to provide their own labs and equipment for referred services if there is strict adherence to a number of conditions. There are other exceptions for preventative screening tests, intra-family referrals, and fair-market compensation. Penalties can be as high as $100,000 or three times the amount claimed as well as exclusion from participation in the program. Intent is not an element for liability so ignorance of the law is not an excuse. Liability under Stark is strict, but civil.
Anti-Kickback: The Anti-Kickback law (42 U.S.C. § 1320a-7b(b)) prohibits the “knowing and willful” offer, solicitation, payment or receipt of any remuneration directly or indirectly for referring an individual for a Medicare or Medicaid covered service or for purchasing, leasing, ordering, arranging for or recommending any good, facility or service covered under a government health program. There are “safe harbors” including rental of equipment and space, investment interests, group purchasing arrangements, and waiver of co-payments.
Again, there are numerous specific requirements for each safe harbor, all of which must be satisfied to avoid liability. Penalties can be civil, as high as $100,000 or three times the remuneration, or criminal, as high as $25,000 and five years in prison. In contrast to Stark, there must be deliberate intent to arrange for an item of value in exchange for referrals in a manner that is prohibited. Thus, liability for kickbacks is not strict, but it can be criminal.
Expensive Lessons: Hospitals and medical centers that have not complied with the conditions of the Stark and Anti-Kickback laws have paid significant fines. In December 2008, Condell Medical Center in Illinois paid $36 million after voluntarily disclosing violations uncovered during pre-acquisition due diligence. Violations included paying physicians for providing services without a written agreement, leasing medical space to referring physicians at below-market rates, deferring or abating rental payments, and allowing physicians to “work off” loans at hourly rates that exceeded fair market value. In 2006, Lincare Holdings, a respiratory company in Florida, paid $10 million in fines for giving referring physicians sports tickets, golf equipment, fishing trips, meals and office equipment and disguising kickbacks as consulting agreements.
While the above examples may be obvious, concerns have also been raised as to almost any free goods and services being offered such as pharmaceutical consultant services, laboratories reviewing infection control or providing chart review, radiology services, computers or durable medical equipment.