The Stark Law
Stark Law is a federal and state law, meaning that both the federal and state governments have the responsibility of ensuring that it is implemented. This law can be found at [42 U.S.C.S. § 1395nn] which is § 1877 of the Social Security Act (Sonnenschein,Nath& Rosenthal LLP, 2009).
Management’s Financial Responsibilities:
Healthcare organizations have various responsibilities under the Stark Law. Firstly, they have the responsibility of ensuring that physicians do not refer patients for particular services that are reimbursed by federal healthcare programs to entities with which they have an ownership interest or compensation arrangement. Under this law, some of the services for which physicians should not refer patients include clinical laboratory services, physical therapy services, occupational therapy services, outpatient speech-language services, radiation therapy services and supplies, home health services, inpatient and outpatient hospital services, as well as outpatient prescription drugs (Sonnenschein,Nath& Rosenthal LLP, 2009). This responsibility is specified in 42 CFR Part 411.
Secondly, under the Stark Law, healthcare organizations are obliged to be careful about compensation arrangements between physicians and beneficiaries. As such, healthcare organizations must understand that for compensation to be permitted, it must meet given criteria: it must be written down and cover specific services or items that can be identified, the time frame for the compensation must be clearly stated, services must not involve promotion of a given business arrangement, and most importantly, the transaction between parties must be commercially reasonable. Healthcare organizations must also understand that in situations where the compensation is fixed for at least a year, it must be stated in advance and be consistent with fair market value (SonnenscheinNath& Rosenthal LLP, 2009). Apart from being careful about compensation arrangements, healthcare organizations must also ensure that approvals of the same are done by the Office of the Inspector General under a favorable advisory opinion. This responsibility that sees healthcare organizations being careful with compensation arrangement between physicians and beneficiaries is stated clearly in 42 CFR Section 411.408 titled “Refunds of amounts collected for physician services not reasonable and necessary, payment not accepted on an assignment-related basis.”
Thirdly, under the Stark Law, healthcare organizations have a responsibility of establishing bona fide employment relationships with physicians. For them to be created certain conditions have to be met.To begin with, the employment must be for identifiable services and the amount of remuneration under it must be consistent with the fair market value of the services provided.Moreover, the payment provided must be under an agreement that would be commercially reasonable even in a situation where referrals are made to the employer. The responsibility of organizations where they have to establish bona fide employment relationships with physicians is stated clearly in 42 CFR Section 411.357. Health care organizations are expected to comply with the stipulations of this law to avoid facing the wrath of both the federal and state governments.
Consequences for Ethical and Legal Breach:
Ethical and legal breach of the Stark Law is considered a civil rather than a criminal offense. There are various consequences of ethically and legally violating it, most of which are considered civil. Firstly, the ethical or legal breach of the Stark law especially on the side of the physician could result in denial of payment on the side of the beneficiary (Staman, 2010). Secondly, in case a person collects any amounts that are billed to be in violation of the Stark Law either ethically or legally, the person is held liable to the individual, and she is expected to refund on a timely basis to the beneficiary, the so collected amounts (Staman, 2010). Thirdly, a violation of the Stark Law can occur when a person presents or plays a part in the presentation of a bill or claim for service for which he or she is well aware that payment may not be made. In such as case, the consequence is that a civil monetary penalty of not more than $15,000 for each service may be applied (Staman, 2010). Fourthly, any physician or other entity that enters into an agreement or scheme which either the entity or physician knows or should know, is responsible for assuring referrals by the physician to a given entry which, if the physician made a direct referral to such an entity, would be in violation of the guidelines of the Stark Law. In such a case, the consequence is that a civil monetary penalty of not more than $100,000 would be applied to such an arrangement or scheme (Staman, 2010). Moreover, a breach of the stipulations of the law may occur when any person who is required to meet a reporting requirement fails to do so. The consequence of this is that a civil monetary penalty of not more than $10,000 is applied for each day for which reporting was to be made.
Several health care organizations and health care providers have been found guilty of legal or ethical breach of the Stark Law. For example, In the case United States v Rogan, it was held that Peter Rogan, a former owner and chief executive officer of Edgewater Medical Center, conspired with other six indicted people to defraud the U.S. government by concealing or refusing to provide information on the fact that several patients came to Edgewater as a result of referrals that were in violation of the Stark Amendment to the Medicare Act, 42 U.S.C Section 1395nn. Since Rogan was found to have been aware of what was going on and even orchestrated the breach, the court ordered him to pay a round $64 million to the U.S. government (Cimasi, 2014). In this case, Rogan was found to be in violation of the False Claims Act (FCA), which is clearly stipulated in the Stark Law. Any individual would agree with the court’s decision in this case because Rogan did not deny the claims, and thus, he was guilty of concealing important information from the government.
Another case where there was a legal or ethical breach of the Stark law is United States ex rel. Singh v Bradford Regional Medical Center. In this case, it was alleged that the latter had made submissions of false claims to Medicare, and as such, had violated both the Anti-Kickback Statute and Stark Law’s guidelines on compensation arrangements and improper lease to physicians. Agreeably, the court’s decision on the case was right because the defendants’ compensation arrangements and lease constituted direct and indirect arrangements for which no exception was applicable.
Moreover, the United States ex rel. Drakeford v Tuomey Healthcare is another perfect example of a violation where a health care organization was found guilty of a legal or ethical breach of the Stark Law. Tuomey Healthcare was found guilty of making false claims, which was in violation of the False Claims Act (Cimasi, 2014). It was also found that some of its part-time employment agreements were in violation of the Stark Law. The court made a right decision on the case because Tuomey failed to compensate physicians based on the value or volume of anticipated referrals.
HCO Management’ Remedial Steps to Reverse the Non-Compliance Organizations:
To reverse health care organizations’ non-compliance with the provisions or stipulations of the Stark Law, various actions ought to be taken. Firstly, health care organizations should provide human resource training, which will help every stakeholder involved to understand the various Anti-Kickback Statute’s safe harbors and Stark Law exceptions. Through this approach, physicians and beneficiaries will strive to abide by or meet the requirements of the Stark Law thereby avoiding possible fines. Secondly, it is important for healthcare organizations to recruit physicians with deep expertise as this will enhance compliance with the Stark Law, which is dependent on the particular contours of each situation (Olson, Stanley & Coker Group, 2007). Thirdly, it is important for healthcare organizations to come up with departments that focus on how stakeholders, especially physicians, comply with the requirements or stipulations of the Stark Law. The heads of these newly created departments should pressurize physicians to comply with or meet the various requirements of the Stark Law.
As seen above, under the Stark Law, which is both a federal and state law, healthcare organizations have the responsibility of ensuring that physicians do not refer patients for particular services that are reimbursed by federal healthcare programs to entities with which they have ownership interest or compensation arrangement.Moreover, they are obliged to be careful about compensation arrangements between physicians and beneficiaries, as well as to establish bona fide employment relationships with physicians. Failure to comply with it might result in denial of payment andtimely refunds to the beneficiary as well as civil monetary penalties depending on the type of violation. To comply with the provisions and requirements of the Stark Law, healthcare organizations need to provide human resource training that will help stakeholders understand its provisions and exceptions.Besides, they should recruit physicians with deep expertise in addition to coming up with departments that focus on compliance issues.
Cimasi, R. J. (2014). Healthcare valuation, the financial appraisal of enterprises, assets, and services (Vol. 2). New York, NY: John Wiley & Sons.
Olson, E. E., Stanley, K., & Coker Group. (2007). Physician recruitment and employment: A complete reference guide. Sudbury, MA: Jones and Bartlett Publishers.
Sonnenschein,Nath& Rosenthal LLP. (2009). The Stark law: A user’s guide to achieving compliance. Marblehead, MA: HCPro.
Staman, J. (2010). Health care fraud and Abuse laws affecting Medicare and Medicaid: An overview. Legislative Attorney,August10, 2010.