Among the frustrating realities for physicians, administrators, and others in the medical profession are never-ending compliance obligations. Regulations can be complex and dense, with compliance costly and time-consuming. The so-called “STARK” framework is frequently overlooked. But it is complex, expansive, and unforgiving, and the potential consequences for non-compliance are severe and include denials of reimbursement, along with civil fines, and penalties. This guide provides an overview of STARK.
What is “Stark” and what does it mean?
“Stark” is a colloquial reference to a U.S. Congressman and chair of the U.S. House Ways and Means Committee on Health, Fortney (Peter) Stark, who in February 1989 introduced federal legislation addressing the relatively straightforward issue of self-referrals by physicians.
The legislation (The “Ethics in Patient Referrals Act of 1989”) addressed a physician’s referral of a patient in a context when the physician stands to gain financially from the referral, an issue that, even before STARK, had been the subject of patchwork state laws and regulations and policy debate for decades. This is because the issue of self-referrals goes to a key issue of medical ethics – the intersection of patient care and provider profit and what is known as “overutilization.”
The initial STARK legislation was codified in the federal Social Security Act[1] and “implementing” regulations and applied only to physician referrals for “clinical laboratory services.”[2] The law was then expanded in 1993, through so-called “STARK II” amendments addressed to the Medicaid program and to additional “designated health services” (“DHS”). [3] Stark II and its implementing regulations “attempted to reduce the regulatory burden by broadening exceptions and creating new exceptions that pose no risk of fraud or abuse,” according to CMS.[4] Voluminous implementing federal regulations necessitated by the statutes have been issued in 2001, 2004, and 2007.
Scope of Stark Prohibition
In tandem, the STARK law and related federal regulations encompass three deceptively simple components, such that a physician is prohibited from (1) making a “referral” for (2) “designated health services” (“DHS”) to an entity part of Medicare or Medicaid where (3) the physician or an immediate family member has a “financial relationship” with the entity.[5] In other words, Stark “prohibit[s] a physician who has a “financial relationship” with an entity—such as a hospital—from making a “referral” to that hospital for the furnishing of certain “designated health services for which payment otherwise may be made by the United States under the Medicare program.”[6]
Although there are exceptions, the broad reading of these terms advanced by regulators and courts warrant caution and care for any potentially affected person in the medical field. Here are some basic definitions –
- “Referral” means:
- Any request by a physician for an item or service for which payment may be made under Medicare Part B, including that physician’s request for a consultation with another physician (and any test or procedure ordered or performed by or under the supervision of that other physician); and
- With respect to items or services not covered under Part B, the request or establishment of a plan of care by a physician which includes the provision of DHS.[7]
- Designated Health Service (“DHS”)
The definition of “DHS” comes from an annual list published in the Federal Register.
- Clinical laboratory services
- Physical therapy services
- Occupational therapy services
- Radiology services, including MRI, CT scans, ultrasound services and nuclear medicine services
- Radiation therapy services and supplies
- Durable medical equipment and supplies
- Parenteral and enteral nutrients, equipment and supplies
- Prosthetics, orthotics and prosthetic devices and supplies
- Home health services
- Outpatient prescription drugs
- Inpatient and outpatient hospital services
- “Financial relationship” means:
Under Stark and its implementing regulations, “financial relationship” includes “a compensation arrangement” in which “remuneration” is paid by a hospital to a referring physician “directly or indirectly, overtly or covertly, in cash or in kind.”[8] An indirect financial relationship exists if, among other things, “there is an indirect compensation arrangement between the referring physician and an entity that furnishes services.” An ownership or investment interest (including debt, equity and “other means”) in an entity providing DHS (or an entity which has an ownership or investment interest in such an entity).
For example, the receipt by a referring physician of aggregate compensation that “varies with, or takes into account, the volume or value of referrals or other business generated by the referring physician for the entity furnishing services.”[9]
- “Immediate family member” is very broad and includes a spouse; birth or adoptive parent, child or sibling; stepparent, stepchild, stepbrother, or stepsister; father-in-law, mother-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law; grandparent or grandchild; and spouse of a grandparent or grandchild.
Exceptions to Stark Rules
Where DHS is involved, any arrangement falling broadly within Stark must fall within an exception, and the only right answer to whether an arrangement falls within an exception is, “It depends.” Very generally, the exceptions may be categorized as follows:
- Physician services.
Services that are furnished (i) personally by another physician who is a member of the referring physician’s group practice or (ii) under the supervision of another physician who is a member of the referring physician’s group practice.[10]
- In-office ancillary services.
Services that are furnished personally by
- the referring physician;
- a physician who is a member of the same medical group as the referring physician, or
- an individual who is supervised by the referring physician or by another physician in the group,
if the services are furnished either
- in the same building in which the referring physician generally practices, and the receipt of DHS is not the primary reason the patient contacted the referring physician, or
- in a centralized building that is used exclusively by the referring physician’s group practice,
provided that the medical group bills for the services using its provider number or the physician rendering services bills using his or her provider number.[11] The most significant practical impact of this exception is that a physician may provide patients with “ancillary” items such as crutches and glucose monitors as a rule, i.e., as long as other requirements are satisfied.
- Services furnished by an organization (or its contractors or subcontractor(s) to enrollees.
“Services furnished by an organization (or its contractors or subcontractors) to enrollees of one of the following prepaid health plans (not including services provided to enrollees in any other plan or line of business offered or administered by the same organization).”[12] More simply put, certain referrals may be exempted when made to organizations that provide services to enrollees of health plans that contract with the federal government to provide services to Medicare beneficiaries.
- Preventive screening tests, immunizations, and vaccines.
Certain tests meeting this description may be exempt if they are subject to “frequency limits” and are reimbursed by Medicare.[13]
Conclusion
This article identifies basic issues associated with arrangements implicating STARK. It is important to remember that STARK may be implicated any time a provider makes a referral to an entity with which the provider has any financial relationship (as defined) related to provision of a DHS, where Medicare or Medicaid pays for some or all of the item or service. Agreements that violate STARK could be invalidated by a court. Because of the complexity, potential penalties, strict liability scheme and other implications, physicians and physician practice groups should carefully and prospectively navigate STARK considerations in any practice setting.
[1] See 42 U.S.C. Sec. 1395nn.
[2] See 42 Code of Fed. Regs., §411.351 et seq. More generally, Stark regulations are at Title 42 of the Code of Fed. Regs. §411.350 – §411.389.
[3] Medicare and Medicaid Patient Protection Act of 1987, 42 U.S.C 1320a-7(b).
[4] See 42 CFR Parts 411, 424.
[5] Statutory or regulatory exceptions apply to “financial relationships that do not pose a risk of program or patient abuse.” See https://www.cms.gov/Medicare/Fraud-and-Abuse/PhysicianSelfReferral/index.html.
[6] U.S. ex rel. Drakeford v. Tuomey Healthcare System, Inc., 675 F. 3d 394, 397 (4th Cir. 2012) (citations omitted).
[7] 42 USC §1395nn(h)(5).
[8] 42 U.S.C. §§ 1395nn(a)(2), (h)(1); 42 C.F.R. § 411.354.
[9] 42 C.F.R. § 411.354(c)(2)(ii)
[10] See 42 CFR 411.355(a).
[11] See 42 CFR 411.355(b).
[12] See 42 CFR 411.355(c).
[13] See 42 CFR 411.355(h).
This content is provided as background and does not constitute legal advice. For more information or to schedule a free consultation, contact us at info@lalorattorneys.com / 646.818.9870.
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