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Stark Law Stark Law Stark Law Stark Law Making the Confusion Understandable Making the Confusion Understandable Robert A. Wade Partner Krieg DeVault LLP 4101 Edison Lakes Parkway, Suite 100 Mishawaka, IN 46545 Telephone: 574-485-2002
Making the Confusion Understandable Making the Confusion Understandable
Robert A. Wade Partner Krieg DeVault LLP 4101 Edison Lakes Parkway, Suite 100 Mishawaka, IN 46545 Telephone: 574-485-2002 Email: bwade@kdlegal.com
KD_4901977
Recognize when the Stark Act is implicated
physician practice physician practice
2
p p y making a Referral
f th f i hi f D i t d H lth
Service
p y ( y )
3
Proof of Intent is Intent is
Not
Required
4
D i l f Denial of payment or refund; civil money penalties (up to $100 000) and (up to $100,000) and exclusions from federal and state programs for improper claims or schemes
5
Simple Example: Simple Example:
Practice
Lab Owned by Dr. X
Re Referral Re Referral
6
Si l E l Si l E l Simple Example: Simple Example:
Practice Lab Owned by Dr. X
Re Referral Re Referral
How Stark II has been applied: How Stark II has been applied:
Hospital V
Medic Medical Suite Suite Medic Medical Suite Suite Re Rent P Payment ments Re Rent P Payment ments Medic Medical Dir Director ectorship ship Medic Medical Dir Director ectorship ship Pa Payments Pa Payments y Re Referral Re Referral
In both examples the referrals violate Stark unless In both examples the referrals violate Stark unless In both examples, the referrals violate Stark unless In both examples, the referrals violate Stark unless an exception applies an exception applies
7
A A referral referral f includes: includes:
Request for an item or a service by a physician Request by physician for consultation with another physician, and any tests or another physician, and any tests or procedures the other physician orders, performs or supervises Request for or
provision of designated health services
8
A referral referral is not a DHS personally performed by a physician is not a DHS personally performed by a physician
examination services
consultation initiated by another physician
9
every type of medical procedure).
not DHS!
10
Entity that bills for DHS service
11
A Financial Relationship includes: p
and
remuneration (i.e., personal service contracts, medical directorships, lease agreements, consulting arrangements, medical service provider arrangements)
12
Remuneration is defined (42 CFR§ 411.351) as “any ( § ) y payment or other benefit made directly or indirectly,
13
Benefits:
p
14
If Financial Relationship exists with an Entity, and y, patients are being Referred for Designated Health Service, then activity must , y either comply with an exception or the activity is illegal g
15
Facility
*New Phase II (7/26/04 effective date)
16
Permitted Ownership Interests:
December 31 2010 – such hospitals cannot i) Expand December 31, 2010 such hospitals cannot i) Expand physician ownership percentage, or ii) Expand capacity such as patient rooms, procedure rooms, etc.
17
p g
Services
and Services (i.e., clinical laboratory services) ( , y )
18
p g
Per Year Per Year
risk pools)
19
20
21
To qualify as a group practice, the professional services must be performed:
“group practice” as referring physician or
another physician who is in same group practice another physician who is in same group practice
22
Group practice means a group of two or more physicians legally organized as a partnership, professional corporation, faculty practice plan or similar association where
f i th t h i i ti l id range of services that physician routinely provides (including medical care, consultation, diagnosis or treatment)
shared office space, facilities, equipment and personnel personnel
23
patient care services are provided through group (Must be able to document through time cards, personal schedules, etc.);
new physician relocating (25 miles+) to join group.
number
Overhead expenses and income from practice are distributed in accordance with previously determined methods
24
Independent Contractors are Physicians in Group Practice but not Members of Group Practice
Independent Contractors Independent Contractors
25
No physician in group may directly or indirectly receive compensation based on volume or value of referrals by physician. (However, physician may be paid share of overall profits or productivity bonus based on services personally f d i i id t t h performed or services incident to such personally performed services.)
26
p value of referrals if one of the following conditions is met:
P fit di id d it (i l h
physician in group);
non-DHS revenues from any federal health care program or private payor; or
group practices’ total revenue and those revenues allocated to each physician in the group is 5% or less
27
DR DR.
$ %of $ $
Patient
GROUP PRACTICE
DR.
%of $ %of $
DR. DHS $ Pooled
%of $
Distribution of Profit from DHS Should Reflect Pooling
28
Group Practice Group Practice
Dr. Dr. Dr. Dr. Dr. Dr. Dr. Dr.
Pt. Pt. Pt. Pt.
Dr. Dr.
Dr. Dr. Dr Dr. Dr. Dr. Dr Dr
Pt Pt. Pt. Pt.
Dr Dr
Dr. Dr. Dr. Dr. Dr. Dr. Dr Dr.
Pt. Pt. Pt Pt.
Dr. Dr.
Dr. Dr. Dr. Dr. Dr. Dr. Dr. Dr.
Pt. Pt. Pt. Pt. Pt Pt
Dr. Dr.
Dr Dr.
Pt Pt.
Can Pool Profits from DHS Into Components If Each Component Has at Least 5 5 Physicians
29
DR. DR
GROUP PRACTICE
$ $
PATIENT PATIENT
$ $
DR. DR. PATIENT
GROUP PRACTICE
$
N
$
$ Passes Through $ Passes Through
Group Practice Cannot Be Used To Pay Physician Directly for DHS Ordered Directly for DHS Ordered
30
31
Direct Compensation Arrangement Created in Direct Compensation Arrangement Created in Phase III with Physicians and their Physician Phase III with Physicians and their Physician Organizations Organizations
have a direct compensation arrangement with an entit f rnishing DHS if the onl inter ening entit entity furnishing DHS if the only intervening entity between the physician and the entity furnishing DHS is his or her physician organization. In such situations, for purposes of this section, the physician is deemed to stand in the shoes of the physician
32
Direct Compensation Arrangement Created in Direct Compensation Arrangement Created in Phase III with Physicians and their Physician Phase III with Physicians and their Physician Organizations Organizations
“Stand in the Shoes” ti d
Physician
Pre-Phase III View Phase III View
continued
Physician
$
Physician Organization Group H i l
$ Direct
Hospital
$
Hospital
Indirect
Hospital
33
Direct Compensation Arrangement Created in Direct Compensation Arrangement Created in Phase III with Physicians and their Physician Phase III with Physicians and their Physician Organizations Organizations
DHS entities and group practices are often viewed as outside the application of the Stark Law
For example, an arrangement that did not meet the Stark Law s definition of a direct compensation arrangement and that also failed to meet one of the prongs of the indirect compensation arrangement definition may allow a physician to make referrals to the entity for the furnishing of DHS without violating the Stark y g g Law’s referral prohibition
entered into after September 5, 2007
structured to comply with the indirect compensation arrangements exception”
34
Physician Services Exception Physician Services Exception (Applied to (Applied to Ownership Ownership and and Compensation Compensation Arrangements) Arrangements) Physician can refer designated health services if such services are performed by a physician in the referring physician’s group practice
35
Physician Services Exception Physician Services Exception (Applied to Applied to Ownership Ownership and and Compensation Compensation Arrangements Arrangements)
36
Physician Services Exception Physician Services Exception (Applied to Applied to Ownership Ownership and and Compensation Compensation Arrangements Arrangements)
(Incident‐to services performed by non‐ physician under physician under Referring Physician’s Supervision)*
*Must meet all supervision requirements in payment coverage rules. Only incident‐to services that are defined as physician services under 42 C.F.R. § 410.20(a). Does not include incident‐to services like diagnostic tests, physical therapy, etc.
37
In In-
Office Ancillary Services Exception (Applies T
Ownership and and Compensation Compensation Relationship Relationship) Must answer 3 q estions
Who?
questions:
How? Where?
38
In In-
Office Ancillary Services (Applies T
Ownership and and Compensation Compensation Relationship Relationship) )
referring physician;
th h i i i ti d
and independent contractors of group practice and independent contractors of group practice
39
In In-
Office Ancillary Services (Applies T
Ownership and and Compensation Compensation
Relationship) Relationship)
40
In In-
Office Ancillary Services (Applies T
Ownership and and Compensation Compensation Relationship) Relationship)
with a single street address assigned by the U.S.
with a single street address assigned by the U.S. Postal Service, not including interior loading docks, mobile vehicles, vans or trailers that meet
is open to the group’s patients for medical services at p g p p least 35 hours per week and a member of the group provides physician services (including non-DHS services) to patients at least 30 hours per week ) p p
41
In In-
Office Ancillary Services (Applies T
Ownership and and Compensation Compensation Relationship) Relationship)
is normally open to patients for medical services at least 8
is normally open to patients for medical services at least 8 hours per week and referring physician provides physician services (include non-DHS services) to patients at this
is normally open to patients for medical services at least 8 hours per week, either referring physician orders DHS services while seeing the patient on the premises or a services while seeing the patient on the premises or a member of referring physician’s group practice is on premises when DHS is performed and referring physician
k week
42
In In-
Office Ancillary Services (Applies T
Ownership and and Compensation Compensation Relationship) Relationship)
A Centralized Building, A Centralized Building, which means all or part of a building that is owned or leased on a full time basis by leased on a full-time basis by a group practice including a mobile vehicle, van or trailer , where some or all of the group practices DHS is provided
43
In In-
Office Ancillary Services (Applies T
Ownership and and Compensation Compensation
Relationship) Relationship)
Given to Patient in Given to Patient in Physician’s Office But Intended To Be Used at home or outside Physician’s Office
44
In In-
Office Ancillary Services (Applies T
Ownership and and Compensation Compensation
Relationship) Relationship)
B i f hi h h h i i i
member, employee or independent contractor under billing number assigned to group under billing number assigned to group practice; or
45
In In-
Office Ancillary Services (Applies T
Ownership and and Compensation Compensation
Relationship) Relationship)
i i i t f supervision requirements, per-use fee arrangements may not work. May have to use block time arrangements See page 51033 of block time arrangements. See page 51033 of the Phase III regulations.
46
In In-
Office Ancillary Services: How Are Services Billed? How Are Services Billed? DME DME
How is equipment used by patient?
crutches, walkers, blood glucose monitors, can be bj t t i ffi ill ti if subject to in-office ancillary exception if:
physician’s office, or is a blood glucose monitor
physician encounter; and
p y y p y , physician in the same group practice, or an employee of the same group practice
47
Key Provisions Key Provisions
PPACA specific authority
48
(Applies T
T
Ownership and and Compensation Compensation Relationship) Relationship)
immediate family member (or to entity with which immediate family member has financial l ti hi ) h l diti t relationship) when several conditions are met including
Ph III i t lt ti t t f 45 i t
transportation time from beneficiary’s residence
49
(Applies T
T
Ownership and and Compensation Compensation Relationship) Relationship)
bl i i t il bilit f i reasonable inquiry as to availability of services requirement
utilized physician should maintain documentation of utilized physician should maintain documentation of information used in determining transportation time (for example Mapquest) and published weather reports should be consulted should be consulted
statute f ( f )
makes reasonable inquiry as to availability of services
Note: Quality of available provider cannot be considered.
50
Personal Service Personal Service Arrangement Exception Arrangement Exception (Applies to Applies to Compensation Compensation Relationships Relationships)
p p arrangement is not prohibited compensation arrangement if:
specifies services covered by arrangement
physician to entity physician to entity
» References all other arrangements; or » References master list of contracts that is maintained with » References master list of contracts that is maintained with
historical record of all arrangements
51
Personal Service Arrangement Exception Personal Service Arrangement Exception (Applies T
Ownership and and Compensation Compensation Relationship Relationship)
S i bl d
set in advance does not exceed FMV is reasonable set in advance, does not exceed FMV, is reasonable and determined through arm’s length negations, and is not determined in manner which takes into account volume or value of referrals between parties account volume or value of referrals between parties
52
Personal Service Arrangement Exception Personal Service Arrangement Exception (Applies T
Ownership and and Compensation Compensation Relationship Relationship)
Hold over month to month following a term of at least one year, assuming all other provisions of the exception are met, continuing on a month-to- month basis for up to 6 months as long as the terms during the hold over period are fair market l ill t th l i value will meet the personal service arrangement exception
53
Rental of Office Space and Equipment Exception Rental of Office Space and Equipment Exception (Applies to Applies to Compensation Compensation Relationships Relationships) (Applies to Applies to Compensation Compensation Relationships Relationships) Pa ments made b lessee to lessor for se of
equipment and premises is not prohibited compensation if: compensation if:
and equipment to be leased
which is reasonable and necessary for legitimate business purposes of lease and is used exclusively business purposes of lease and is used exclusively by lessee when being leased by lessee
54
Rental of Office Space and Equipment Exception Rental of Office Space and Equipment Exception (Applies to Applies to Compensation Compensation Relationships Relationships)
(Applies to Applies to Compensation Compensation Relationships Relationships)
y
advance, consistent with fair market value, and not d t i d i th t t k i t t determined in a manner that takes into account volume or value of referrals or other business generated between parties; and
referrals were made between parties
55
Rental of Office Space and Equipment Exception Rental of Office Space and Equipment Exception (Applies to Applies to Compensation Compensation Relationships Relationships) Hold o er month to month follo ing a term of at (Applies to Applies to Compensation Compensation Relationships Relationships)
least one year, assuming all other provisions of the exception are met continuing on a month-to- the exception are met, continuing on a month to month basis for up to 6 months as long as the terms during the hold over period are fair market g p value will meet the rental of office space and equipment exceptions
56
Rental of Office Space and Equipment Exception Rental of Office Space and Equipment Exception (Applies to Applies to Compensation Compensation Relationships Relationships) Cannot base compensation on (Applies to Applies to Compensation Compensation Relationships Relationships)
57
Agreement can be terminated within the first year with or without cause as long as the parties do not enter into a new agreement during the first year of the original term.
58
, determined through arm’s length negotiations
volume or value of referrals by referring physician; volume or value of referrals by referring physician; and
would be commercially reasonable even if no would be commercially reasonable even if no referrals were made to employer
59
Prod cti it bon ses can be paid if based on
services performed personally by the physician (i e worked RVUs) (i.e., worked RVUs)
60
q g
particular provider, practitioner or supplier so long as:
different provider
q p y p not cover services at required providers
the required referral is not in the patient’s best medical interest
61
Requiring referrals (Continued)
services covered by the scope of the employment and the referral requirement is reasonably necessary for the legitimate business purposes of the compensation arrangement between the employer and the g p y employee
Good Bad Employed Primary Care – Inpatient Bad Medical Director ‐ Inpatient Inpatient
62
Remuneration can be paid by hospital to physician to induce physician to relocate their practice to geographic area served by hospital if:
patients to recruiting hospital
anticipated referrals by physician to the hospital
hospital and may refer business to other DHS entities Note: This exception specifically references the referral requirement if a separate employment agreement with the physician requires the referrals physician requires the referrals
63
Note that the exception does not specifically state that the remuneration paid must be fair market value or commercially reasonable
however, must solely be to induce the physician to relocate their practice, nothing more, nothing less
64
A physician will be considered to have relocated their medical practice if:
miles into the “geographic area served by the hospital”; or
treated by the physician at their prior medical practice site during the preceding three years
65
The geographic area served by the hospital consists of the lowest number of contiguous zip codes from which the hospital draws at least 75% of its inpatients
i l d i d f hi h th h it l d include zip codes from which the hospital draws zero patients as long as such zip codes are surrounded by contiguous zip codes that meet the 75% test
lower than 75% if the contiguous zip codes cannot add up to 75% add up to 75%
66
Relocation requirement not required for i) residents, and ii) physicians who have been in practice one year or less.
physicians who have been employed for at least 2 years do not need to relocate if they worked for i) Federal or State Bureau of Prisons, ii) Department of Defense or Department of Department of Defense or Department of Veterans Affairs; or iii) an Indian health service facility facility
67
Recruited physician may join existing practice if:
payments are directly made
passed through to the recruited physician passed through to the recruited physician
additional incremental costs allocated to recruit
68
y
volume or value of actual or anticipated referrals from th ti the practice
restrictions on recruit restrictions on recruit
69
l t i ti it d h i i l th
place restrictions on recruited physicians as long as the restrictions do not unreasonably restrict the recruited physician’s ability to practice in the geographic area. CMS, in the preamble, concluded that such restrictions may include p , y the following:
1) Restrictions on moonlighting 2) Prohibitions on solicitation of patients and/or employees 3) R i i th it d h i i t l 3) Requiring the recruited physician to repay losses 4) Requiring the recruited physician to pay reasonable damages if the physician leaves the practice 5) Limited, reasonable, non-compete clauses ) , , p
not per se reasonable. Non-competes that violate state law would unreasonably restrict the recruited physician
70
Medical practices outside of geographic area in rural areas.
physician’s medical practice outside of the “geographic area served by the hospital” as long as the hospital obtains an advisory opinion the hospital obtains an advisory opinion
71
Recruitment to HPSA
physician who, within the previous 12 months, retired, relocated outside of the geographic area, or died, if the physician joins an existing group, for allocation of expenses, the group can use the lower of a per capita p , g p p p allocation or 20% of the practice’s aggregate cost
72
financial transactions, such as one-time sale of property or practice, if:
through arm’s length negotiations;
volume or value of referrals by referring physician; and
would be commercially reasonable even if no referrals were made to purchaser were made to purchaser.
after isolated transaction
73
a DHS entity is permitted if:
that takes into account the volume or value of f l t d b t th ti referrals generated between the parties
74
Compensation (defined as any benefit) not
including cash or cash equivalents (i.e., gift certificates that may be redeemed in whole or in part f h) t d t f $373 for cash), may not exceed an aggregate of $373 per year per physician as long as:
p referrals
with their practice p
group
75
The c rrent $373 limit is pdated ann all
hh /Ph i i S lfR f l/
stark_act.aspx
76
the hospital will still be deemed to be in compliance if i) the value of the excess is no more than 50% of the limit, and ii) the physician returns the excess by the end of the calendar year or within 180 consecutive calendar days whichever is earlier consecutive calendar days, whichever is earlier
Hospitals can now hold 1 formal medical staff event per year without including the cost in this exception
77
For e ample
and allocate $200 to each physician and allocate $200 to each physician
78
that “[the Medical Staff Incidental Benefits Exception] was not intended to cover the Exception] was not intended to cover the provision of tangential, off-site benefits, such as restaurant dinners or theater tickets, which restaurant dinners or theater tickets, which must comply with the exception for non-monetary compensation up to $300.” (emphasis added)
79
Non Non-
Monetary Compensation Exception (Applies to (Applies to Compensation Compensation Relationships) Relationships) CME CME
“[F]ree CME could constitute remuneration to the physician [F]ree CME could constitute remuneration to the physician depending on the content of the program and the physician’s obligation to acquire CME credits.” Phase II, page 16114
80
Pa ments that are fair market al e are
permitted compensation arrangements if:
y g conditions do not change during 1 year
81
to volume or value of referrals
y g business interests
physician,and ii) physician to DHS entity. Also cannot base compensation on cannot base compensation on
82
Items or services used on the hospital s campus may be given to members of its medical staff if:
same specialty without regard to volume or value of referrals
the medical staff members are making rounds or involved in other services that benefit the hospital and its patients
83
delivery of medical services at the hospital
(updated annually)
Free For Physicians Physicians
84
p p y g “internet access, pagers, or two-way radios, used away from the campus only to access hospital medical records or information or to hospital medical records or information or to access patients or personnel who are on the hospital campus, as well as the identification of p p , the medical staff on a hospital Web-site or in hospital advertising will meet the single advertising, will meet the single “on campus” requirement….” (emphasis added)
85
Compliance training to physicians in the local community or service area is permitted if it is related to:
d t ti d h i i t documentation, and physician arrangements
conduct of the parties conduct of the parties
education
86
Indirect Compensation Arrangement Exception Indirect Compensation Arrangement Exception (A li t (A li t C i C i R l ti hi ) R l ti hi ) (Applies to (Applies to Compensation Compensation Relationships) Relationships)
The Definition:
An indirect compensation arrangement is any series of ownership or investment interest or compensation arrangements, and the compensation arrangement closest to the referring physician, in the t i b d th l l f f l F aggregate, varies based upon the volume or value of referrals For example:
A
Own Own Own Own
Compensation Compensation
B C
Compensation Compensation
D
DHS Entity Aggregate varies
87
Indirect Compensation Arrangement Exception Indirect Compensation Arrangement Exception (A li t (A li t C i C i R l ti hi ) R l ti hi ) (Applies to (Applies to Compensation Compensation Relationships) Relationships)
The Exception: p
The individual payment of the compensation arrangement that is closest to the referring physician (in the example below, the compensation between company B and C) must be fair market value.
A
Own Own Own Own
Compensation Compensation
B C
Compensation Compensation
D
DHS Individual payments DHS Entity are FMV
Note: Cannot base compensation on i) “per click” if physician/owner is source
Also, arrangement must be in writing!
88
physician’s immediate family member or office staff is permissible if all of the following conditions are met: met:
volume or value of referrals
DHS entity
approved in advance by the governing body
Medicare/Medicaid beneficiary (except in the case of financial need)
89
Retention Payments In Underserved Areas Retention Payments In Underserved Areas Exception Exception (Applies to (Applies to Compensation Compensation Relationships) Relationships)
Hospital may provide benefits to a physician to retain the physician's medical practice in the geographic area served by the hospital if:
Exception requirements for a new recruit establishing a solo practice a solo practice.
(“HPSA”) or is in an area deemed to be in need by the ( ) y Secretary of DHHS in an advisory opinion.
90
Retention Payments In Underserved Areas Retention Payments In Underserved Areas Exception Exception
(Applies to (Applies to Compensation Compensation Relationships) Relationships)
ii) physician can certify offer that
Offer received from an unrelated hospital
q p y p and outside the geographic area of the hospital
91
Retention Payments In Underserved Areas Retention Payments In Underserved Areas Exception Exception
(Applies to (Applies to Compensation Compensation Relationships) Relationships)
the lower of
income proposed by offer for 24 months; or income proposed by offer for 24 months; or
limited to the lower of limited to the lower of
recruit a new physician. recruit a new physician.
physician
92
Retention Payments In Underserved Areas Retention Payments In Underserved Areas Exception Exception (Applies to (Applies to Compensation Compensation Relationships) Relationships)
Due to the recognition of a retention payment for the HPSA, no retention payment can be made outside a HPSA (without seeking advisory opinion) HPSA (without seeking advisory opinion)
93
Community Community-
Wide Health Information System Exception Exception (Applies to (Applies to Compensation Compensation Relationships) Relationships)
provided to a physician to allow access to and provided to a physician to allow access to and sharing of electronic health care records if:
physician to participate in a community wide health physician to participate in a community-wide health information system
as part of the community-wide health information system as part of the community wide health information system
volume or value of referrals
y y to all providers, practitioners and residents of the community who desire to participate
94
manner and times specified by CMS or OIG but not less than 30 days.
q
with financial relationship (except publicly traded and mutual fund shareholders)
entity knows or should know about in the course of prudently conducting business ( e.g ., IRS, SEC, Medicare record keeping requirements) record keeping requirements)
95
Mi i ttl t t f $50 000
Contractors
p
96
Effective September 23, 2010, DHHS is required to announce self reporting process with authority self-reporting process with authority to negotiate settlement
97
Posted to CMS web site on September 23, 2010
erral_Disclosure_Protocol.asp#TopOfPage
rulemaking
98
Overpayment must be reported within 60 days of the date the overpayment was determined after “reasonable inquiry”
copy must be submitted electronically to 1877SRDP@CMS.hhs.gov
99
certification number, tax identification number
violation of the Stark Law occurred
100
discovered
enforcement action D i ti f t ’ li d ff t
implemented by disclosing party to prevent reoccurrence
101
currently under investigation by a government agency y g y g g y
Fi i l l i it i d b f t ti l
amount owed during period of disallowance
102
indicating that the information provided is truthful, to the best of the certificant’s knowledge.
103
1) Are Referrals made? 1) Are Referrals made?
Go To 2
Do The Deal
104
2) Is a Designated Health Service involved? 2) Is a Designated Health Service involved?
Go To 3
Do The Deal
105
3) Is the recipient of the referrals a DHS Entity 3) Is the recipient of the referrals a DHS Entity [bills for or performs the DHS]?
Go To 4 N D Th D l
Do The Deal
106
4) Does a Financial Relationship (ownership 4) Does a Financial Relationship (ownership and/or compensation) exist with the referring physician?
Go To 5
Do The Deal
107
5) Does the relationship qualify, in all respects, 5) Does the relationship qualify, in all respects, with an exception?
Do the Deal N
108
Denial of payment or refund; payment or refund; civil money penalties (up to $100 000) and $100,000) and exclusions from federal and state programs for programs for improper claims or schemes
109
Criminal Statute
110
Civil Penalties
111