Stark Law

                                PHYSICIAN SELF-REFERRAL: STARK LAW

The physician self-referral law, commonly known as the Stark law, prohibits a physician from making referrals for certain designated health services (DHS) payable by Medicare or Medicaid to an entity with which the referring physician (or the physician’s immediate family member) has a financial relationship. The Stark law also prohibits an entity from presenting, or causing to be presented, claims to Medicare or Medicaid for referred services that violate the self-referral prohibition. If you are trying to determine if an arrangement will violate the Stark law, you should ask yourself if the following four basic elements of the self-referral prohibition apply:

1. A physician makes a referral to an entity; and
2. A financial relationship exists between the physician (or the physician’s immediate family member) and the entity; and
3. The referral is for the provision of a designated health service (DHS); and
4. The item or service is paid for in whole or in part by Medicare or Medicaid. If you answer yes to all four of the above elements, unless an exception applies, the arrangement will violate Stark.

There are a number of exceptions to the law. Some of the common exceptions that are applicable to office-based practices are the physician services, in-office ancillary services, the personal services arrangements, lease of space, and lease of equipment exceptions. A very common, and very dangerous, misconception about the Stark law is that a group practice exception exists, and that referrals within a practice are always exempt from the law. In reality, there is no separate and distinct group practice exception. There are however several exceptions to the law that hinge on whether or not the group meets the Stark definition of a group practice, such as the in-office ancillary services exception and the physician services exception. See Appendix A for an in-depth breakdown of the Stark definition of a group practice, as well as a breakdown of the elements for each of the six exceptions mentioned above.

Important Terms and Key Concepts

The Stark law defines terms in a way that may be different from both common usage and usage in the practice of medicine. When reviewing an arrangement, it is critical that you understand the terms as they are defined in the law.

• Physician – A doctor of medicine, osteopathy, dental surgery, dental medicine, podiatric medicine, or optometry. Chiropractors are also included in the law’s definition of physician.
• Referral – A request by a physician (including the ordering of, or the certifying or recertifying of the need for) any DHS for which payment may be made under Medicare. The law’s definition of referral includes a request for a consultation with another physician and any test or procedure ordered by, to be performed by, or under the supervision of the other physician. The request or establishment of a plan of care by a physician which includes the provision of DHS constitutes a referral by a referring physician.
• Referring Physician – A physician who makes a referral, who directs another person or entity to make a referral, or who controls referrals made by another person or entity. A referring physician and the professional corporation of which he or she is a sole owner are considered one and the same under the Stark law.
• Financial Relationship – A financial relationship can be in the form of a direct or indirect ownership or investment interest in the entity that furnishes DHS. A financial relationship can also be a compensation arrangement between the physician and the entity. Several types of financial relationships can exist between one entity and one physician. Just because one financial relationship satisfies a Stark law exception does not mean every financial relationship between that entity and physician is legitimate. Each financial relationship that meets the four basic elements of the self-referral prohibition must fit into an exception under the Stark law in order to survive scrutiny. Ownership or Investment Interest – debt, equity, or other financial means. Includes an interest in an entity that holds an ownership or investment interest in any entity providing the DHS.
• Compensation Arrangement – any arrangement involving any remuneration between a physician (or the physician’s immediate family member) and an entity. This includes remuneration that is direct, indirect, overt, covert, in cash and/or in-kind.
• Immediate Family Member – The law defines immediate family member as any of the following: • Husband or wife • Children • Birth or adoptive parent • Sibling • Grandparent or grandchild • Spouse of a grandparent or grandchild • Stepparent, stepchild, stepsibling • Father-in-law, mother-in-law, son-in-law, daughter-in-law • Brother-in-law, sister-in-law
• Entity – A physician’s sole practice, a practice of multiple physicians or any other person, sole proprietorship, corporation, partnership, LLC, foundation, nonprofit corporation, unincorporated association, or public or private agency or trust that furnishes DHS. An entity does not include the referring physician himself/herself, but does include his/her medical practice.
• Designated Health Service (DHS) – The following items and services are DHS: • Clinical lab services • Durable medical equipment and supplies • Home health services • Inpatient and outpatient hospital services • Occupational therapy services • Outpatient prescription drugs • Outpatient speech-language pathology services • Parenteral and enteral nutrients, equipment, and supplies • Physical therapy services • Prosthetics, orthotics, and prosthetic devices and supplies • Radiation therapy services and supplies • Radiology and certain other imaging services Disclaimer: The information presented above was current at the time it was published on the website. Medicare, Medicaid, and CHIP legislation and enforcement policies change frequently. It is always a good idea to check with your compliance department and/or legal counsel on legislation that impacts your medical practice.