New Revisions to Stark Law: Beware the “Per-Click Lease” – Maybe?
Scenario: You have an arrangement with your local hospital. You are a urologist and your practice owns a laser machine. You lease your laser machine to Hospital A, and your lease allows you to receive additional, but fair market value, money depending on how often your machine is used. Legal?
A new Final Ruling from the Centers for Medicare and Medicaid Services (CMS) provides murky guidance.
CMS finalized the 2017 Medicare Physician Fee Schedule (PFS) rule, which took effect on January 1, 2017. There have been few major revisions to the Stark Law since 2008…until now. The Stark Law is named for United States Congressman Pete Stark (D-CA), who sponsored the initial bill in 1988. Politicians love to name bills after themselves!
Absent an exception, the Stark Law prohibits a physician from referring Medicare patients for certain designated health services (“DHS”), for which payment may be made under Medicare, to any “entity” with which the physician (or an immediate family member) has a “financial relationship.” Conversely, the statute prohibits the DHS-furnishing entity from filing claims with Medicare for those referred services.
Despite the general prohibition on potentially self-interested referrals, the Stark Law permits Medicare referrals by physicians to entities in which they have a financial interest in certain limited circumstances. But these circumstances are limited and must be followed precisely and without deviation.
These exceptions are created by legally excluding some forms of compensation agreements and ownership interests from the definition of “financial relationship,” thus allowing both the relationships and the referrals. See 42 U.S.C. § 1395nn(b)-(e).
One of such exceptions to the Stark Law is the equipment lease exception.
This equipment lease exception to Stark law allows a financial relationship between physicians and hospitals for the lease of equipment, only if the lease (1) is in writing; (2) assigns the use of the equipment exclusively to the hospital; (3) lasts for a term of at least one year; (4) sets rental charges in advance that are consistent with fair market value and “not determined in a manner that takes into account the volume or value of any referrals or other business generated between the parties”; (5) satisfies the standard of commercial reasonableness even absent any referrals; and (6) meets “such other requirements as the Secretary may impose by regulation as needed to protect against program or patient abuse.”
For example, like the scenario above, a urology group owns and leases a laser machine to Hospital A. As long as the lease meets the criteria listed above, the urologists may refer Medicare patients to Hospital A to their hearts’ content – even though the urologists benefit financially from their own referrals.
However, what if the monetary incentive is tied to the amount the machine is actually used – or the “per-click lease?”
In a court case decided in January 2015, Council for Urological Interests v. Burwell, a D.C. circuit court decided that CMS’ ban on per-click leases was unreasonable.
In CMS’ Final Ruling, effective January 1, 2017, CMS again re-issued the per-click lease ban. But CMS’ revised ban appears to be more parochial in scope. CMS states that it “did not propose and [is] not finalizing an absolute prohibition on rental charges based on units of service furnished” and that “[i]n general, per-unit of service rental charges for the rental of office space or equipment are permissible.” As CMS had previously stated, the per-click ban applies only “to the extent that such charges reflect services provided to patients referred by the lessor to the lessee.”
Considering how unclear the Final Rule is – We are banning per-click leases, but not absolutely – expect lawsuits to clarify. In the meantime, re-visit your equipment leases. Have your attorney review for Stark compliance – because for the first time since 2008, major amendments to Stark Law became effective January 1, 2017.
Do the Anti-Kickback and Stark Laws Apply to Private Payors?
Anti-Kickback statutes (AKS) and Stark law are extremely important issues in health care. Violations of these laws yield harsh penalties. Yet, many healthcare professionals have little to no knowledge on the details of these two legal beasts.
The most common question I get regarding AKS and Stark is: Do AKS and Stark apply to private payers? Health care professionals believe, if I don’t accept Medicare or Medicaid, then I don’t need to worry about AKS and Stark. Are they correct??
The general and overly broad response is that the Stark Law, 42 USC § 1395nn, only applies to Medicare and Medicaid. The AKS, 42 USC § 1320a-7b(b)),applies to any federal healthcare program.
Is there a difference between AKS and Stark?
Answer: Yes. As discussed above, the first difference is that AKS applies to all federal healthcare programs. This stark difference (pun intended) makes the simple decision to not accept Medicare and Medicaid, thus allowing you to never worry about AKS, infinitely more difficult.
Let’s take a step back… What are AKS and Stark laws and what do these laws prohibit? When you Google AKS and Stark, a bunch of legal blogs pop up and attempt to explain, in legalese, what two, extremely esoteric laws purport to say, using words like “renumeration,” “knowing and willful,” and “federal healthcare program.” You need a law license to decipher the deciphering of AKS and Stark. The truth is – it ain’t rocket science.
The AKS is a criminal law; if you violate the AKS, you can be prosecuted as a criminal. The criminal offense is getting something of value for referrals. You cannot refer patients to other health care professionals in exchange for money, reduced rent, use of laboratory equipment, referrals to you, health services for your mother, marketing, weekly meals at Ruth’s Chris, weekly meals at McDonalds, oil changes, discounted theater tickets, Uber rides, Costco coupons, cooking lessons, or…anything of value, regardless the value.
Safe harbors (exceptions to AKS) exist. But those exceptions better fit squarely into the definition of the exceptions. Because there are no exceptions beyond the enumerated exceptions.
AKS is much more broad in scope than Stark. Other than Medicare and Medicaid, AKS applies to any health care plan that utilizes any amount of federal funds. For example, AKS applies to Veterans Health Care, State Children’s Health Programs (CHIP), Federal Employees Health Benefit Program, and many other programs with federal funding. Even if you opt to not accept Medicare and Medicaid, you may still be liable under AKS.
Stark law, on the other hand, is more narrow and only applies to Medicare and Medicaid. I find the following “cheat sheet” created by a subdivision of the Office of Inspector General to be helpful in understanding AKS and Stark and the differences between the two:
One other important aspect of Stark is that is considered “strict liability,” whereas AKS requires a proving of a “knowing and willful” action.
Feel free to print off the above chart for your reference. However, see that little asterisk at the bottom of the chart? It applies here as well.
Step Right Up! CMS Announces New Medicare-Medicaid ACO Model
Come one! Come all! Step right up to be one of the first 6 states to test the new Medicare-Medicaid Affordable Care Act (ACO) pilot program.
Let your elderly population be the guinea pigs for the Center for Medicare and Medicaid Services (CMS). Let your most needy population be the lab rats for CMS.
On December 15, 2016, CMS announced its intent to create Medicare/caid ACOs. Currently, Medicare ACOs exist, and if your physician has opted to participate in a Medicare ACO, then, most likely, you understand Medicare ACOs. Medicare ACOs are basically groups of physicians – of different service types – who voluntarily decide (but only after intense scrutiny by their lawyers of the ACO contract) to collaborate care with the intent of higher quality and lower cost care. For example, if your primary care physician participates in a Medicare ACO and you suffer intestinal issues, your primary care doctor would coordinate with a GI specialist within the Medicare ACO to get you an appointment. Then the GI specialist and your physician would share medical records, including test results and medication management. The thought is that the coordination of care will decrease duplicative tests, ensure appointments are made and kept, and prevent losing medical records or reviewing older, moot records.
Importantly, the Medicare beneficiary retains all benefits of “normal” Medicare and can choose to see any physician who accepts Medicare. The ACO model is a shift from “fee-for-service” to a risk-based, capitated amount in which quality of care is rewarded.
On the federal level, there have not been ACOs specially created for dual-eligible recipients; i.e., those who qualify for both Medicare and Medicaid…until now.
The CMS is requesting states to volunteer to participate in a pilot program instituting Medicare/Medicaid ACOs. CMS is looking for 6 brave states to participate. States may choose from three options for when the first 12-month performance period for the Medicare-Medicaid ACO Model will begin for ACOs in the state: January 1, 2018; January 1, 2019; or January 1, 2020.
Any state is eligible to apply, including the District of Columbia. But if the state wants to participate in the first round of pilot programs, intended to begin 2018, then that state must submit its letter of intent to participate by tomorrow by 11:59pm. See below.
I tried to research which states have applied, but was unsuccessful. If anyone has the information, I would appreciate it if you could forward it to me.
Participating in an ACO, whether it is only Medicare and Medicare/caid, can create a increase in revenue for your practices. Since you bear some risk, you also reap some benefit if you able to control costs. But, the decision to participate in an ACO should not be taken lightly. Federal law yields harsh penalties for violations of Anti-Kickback and Stark laws (which, on a very general level, prohibits referrals among physicians for any benefit). However, there are safe harbor laws and regulations specific to ACOs that allow exceptions. Regardless, do not ever sign a contract to participate in an ACO without an attorney reviewing it.
Food for thought – CMS’ Medicare/caid ACO Model may exist only “here in this [Obama] world. Here may be the last ever to be seen of [healthcare.gov] and their [employee mandates]. Look for it only in [history] books, for it may be no more than a [Obamacare] remembered, a [health care policy] gone with the wind…”
As, tomorrow (January 20, 2017) is the presidential inauguration. The winds may be a’changing…
What is the Stark Law? And Why Is It Important to You?
It seems apropos that a US Congressman was named Pete Stark who first sponsored what came to be known as the Stark law, because the Stark law mandates stark penalties for financially driven physician referrals. Get it? Cheesy, I know.
The Stark law (42 U.S.C. 1395nn) prohibits physician referrals of designated health services (DHR) for Medicare and Medicaid if the physician has a financial interest with the “referred to” agency.
For example, Dr. Goneril is an internist. As an investment, he and his partner, Dr. Regan open a local laboratory “Gloucester” and hire Mr. Lear to run Gloucester. Drs. Goneril and Regan are silent partners. Dr. Goneril orders blood work on Patient Cordelia and refers her to Gloucester.
The above example would be a direct violation of the Stark law.
The penalties are severe. If caught, Dr. Goneril would have to repay all money received for services in which he referred Cordelia to Gloucester. In addition, he could be penalized $15,000 for every time he improperly referred Cordelia, plus three times the amount of improper payment he received from the Medicare/caid program, possible termination from the Medicare/caid program, and penalties of up to $100,000 for every time he tried to circumvent the Stark law.
On the federal level, the Department of Justice, the Center for Medicare and Medicaid Services (CMS), and the Department of Health and Human Services (DHHS) are tasked with enforcing the Stark law.
Recent years have seen the most Stark law violations since its inception and it is only being enforced more and more.
On June 9, 2015, the Office of Inspector General (OIG) issued a fraud alert regarding the Stark law. Investigations since June 2015 has risen significantly.
Here are some recent Stark settlements (for you to understand the severity):
- Adventist Health System agreed to pay $118.7 million to the federal government and to multiple states.
- Columbus Regional Healthcare System is paying $25 million.
- Citizens Medical Center in Victoria, Texas, agreed to pay $21.75 million.
“O, reason not the need! Our basest beggars / Are in the poorest thing superfluous. / Allow not nature more than nature needs, / Man’s life’s as cheap as beast’s.” (King Lear, II, iv).
How do you defend yourself if you are accused of a Stark violation?
First and foremost, hire a qualified health care attorney. There are exceptions to the Stark law which, hopefully, you fall within. Furthermore, there are multiple legal arguments that can abate penalties. You do not always want to settle.There have been a number of agencies, that recently, decided to never settle. Oddly enough, the number of their audits decreased. Maybe the government targets easy money.