Confused? Here's what the Stark laws really mean
Confused? Here's what the Stark laws really mean
By Elizabeth E. Hogue, JD
Health Care Attorney
Elizabeth Hogue, Chartered
Burtonsville, MD
There is a perception among members of Congress that fraud and abuse is rampant in the health care industry. The Stark I and II legislation are just two examples of our legislators' determination to establish tools to enforce applicable prohibitions.
Unfortunately, there has been much confusion among home health care professionals about the Stark legislation and how it affects them. These are some questions that are commonly asked about it, and the answers you need to make sure your business stays within the boundaries of these laws:
Question: What are the Stark amendments?
Answer: U.S. Rep. Pete Stark (D-CA) spearheaded a number of initiatives to limit the ability of physicians to refer patients and benefit from the referrals they make. The first successful initiative is commonly referred to as "Stark I."
The purpose of this legislation is to limit referrals of patients by physicians to clinical laboratories in which they have an ownership interest. Stark I became effective on Jan. 1, 1994.
A second statute promoted by Stark often is called "Stark II." It limits the ability of physicians to refer patients for so-called designated health services (DHS) if they derive benefit from such referrals. This statute became effective on Jan. 1, 1995.
Because home health services and home medical equipment and supplies are included on the list of designated health services, this legislation is important to agency managers.
Q: What does Stark II prohibit?
A: The law prohibits physicians who have a financial relationship with entities that provide designated health services such as home health services from referring Medicare and Medicaid patients to that entity. The prohibition also applies to immediate family members of physicians who have a financial relationship with an entity that provides such services. The statute is triggered by the existence of financial relationships; the intentions of referring physicians are irrelevant under this statute.
Q: What financial relationships are prohibited by Stark II?
A: Physicians have financial relationships if they or their immediate family members have ownership or investment interests in entities that provide designated health services, or if they have compensation arrangements with those entities. The ownership/investment interest may take the form of equity, debt, or other means. It includes an interest physicians or family members have in an entity that does not itself provide DHS, but that owns or holds an investment interest in an entity that does provide these services, such as a holding company.
'Arrangement' equals payment of any kind
A compensation arrangement exists when there is any arrangement in which payment of any kind passes between physicians or immediate family members and an entity. For example, a physician has a compensation arrangement with home health agencies when agencies pay physicians salaries or consulting fees. A compensation arrangement also exists when physicians pay entities for items or services either directly or indirectly, overtly or covertly, in cash or in kind.
Q: What constitutes a referral?
A: Physicians make referrals when they request an item or service such as home health services. According to Stark II, physicians also make referrals when they request or establish a plan of care that includes DHS, such as home health services that will be provided to patients.
Q: How do exceptions to the statute affect the prohibition?
A: Although the definition of a financial relationship is broad, there are several exceptions to the statute as follows:
* Exceptions related to both ownership and compensation arrangements:
-- physicians' services when physicians
refer to members of the same legitimate group practice;
-- certain in-office ancillary services furnished by solo practitioners and group practices;
-- services furnished by certain organizations with prepaid plans such as managed care organizations (MCOs).
* Exceptions related only to ownership/ investment interests:
-- ownership in certain publicly traded securities and mutual funds;
-- DHS provided by hospitals in Puerto Rico;
-- DHS furnished by rural providers;
-- DHS provided by hospitals outside of Puerto Rico if the referring physicians can perform services at the hospital, and the ownership of investment interests is in the whole hospital as opposed to a subsidiary of the hospital.
* Exceptions related to compensation arrangements:
-- payments made for the rental of office space or equipment;
-- payments made to physicians or immediate family members who have a bona fide employment relationship with an entity;
-- payments made to physicians or family members for personal services;
-- payments made by providers to physicians if the payments do not relate to DHS;
-- payments made by hospitals to recruit physicians.
Q: How does Stark II apply to home care providers?
A. Stark II makes it clear that agencies may not bill Medicare, Medicaid, the beneficiary, or anyone else for DHS furnished to Medicare patients as a result of prohibited referrals. Under the Medicaid program, the federal government cannot pay federal financial participation (FFP) to a state for medical assistance for a referral that would not be covered under Medicare, if the Medicare program covered the items or services.
Home health agencies, thus, have an affirmative obligation to review the ownership of their agencies
and any financial arrangements they have with physicians to make certain they do not have any
relationships prohibited by Stark II.
As long as no prohibited relationships exist with regard to either ownership or financial arrangements,
agencies may bill for services without violating Stark II.
Q: Many home health providers have medical directors who are paid for legitimate services
provided to the agency. If these same physicians also refer patients to the agency for home
care services, a DHS according to Stark II, may
the agency bill for services provided to such patients?
A: Agencies may bill for services provided to such patients. Stark II includes specific exceptions for payments from entities such as home health agencies for specific, identifiable services to physicians as medical directors, or as members of medical advisory boards at agencies required to have medical directors and advisory boards as a condition of participation in the Medicare and Medicaid programs. Because certified home health agencies clearly fall into this category, it is permissible for agencies to bill for services to patients referred by physicians who are paid for their services as medical directors or members of advisory boards. *
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