| The Federal Stark law prohibits physicians from | | | | - Any alternative measure that is reasonable, fixed in |
| referring Medicare/Medicaid beneficiaries to an entity in | | | | advance of the performance of the services being |
| which they (or an immediate family member) have a | | | | measured, uniformly applied over time, verifiable, and |
| financial relationship for designated health services | | | | documented. |
| (“DHS”), unless an exception applies. DHS | | | | Distribution of Expenses and Income. |
| include: clinical lab; physical therapy; occupational | | | | The overhead expenses of, and income from, the |
| therapy; radiology (including, MRI, CAT scans, and | | | | practice must be distributed according to methods that |
| ultrasounds); radiation therapy and supplies; DME and | | | | are determined before the receipt of payment for the |
| supplies; parenteral and enteral nutrients, equipment and | | | | services giving rise to the overhead expense or |
| supplies; prosthetics, orthotics, and prosthetic devices | | | | producing the income. |
| and supplies; home health services; outpatient | | | | Unified Business. |
| prescription drugs; and inpatient and outpatient | | | | The group practice must be a unified business having |
| hospitalization services. In addition, physicians | | | | at least the following features: |
| should also be mindful that the Centers for Medicare | | | | Centralized decision making by a body representative |
| and Medicaid Services (“CMS”) issued a | | | | of the group practice that maintains effective control |
| proposed rule to amend the Stark regulations effective | | | | over the group’s assets and liabilities; and |
| January 1, 2006 to include diagnostic and therapeutic | | | | Consolidated billing, accounting, and financial reporting. |
| nuclear medicine, including PET scans, to the list of | | | | Volume or Value of Referrals. |
| DHS. | | | | No physician who is member of the group practice |
| Physicians must keep in mind that they cannot ignore | | | | directly or indirectly receives compensation based on |
| Stark, as nearly every financial relationship between | | | | the volume or value of referrals except as provided |
| physicians and entities that furnish designated health | | | | under the specialty rules for productivity and profit |
| services (“DHS”) implicate the law. Violations | | | | shares. |
| of the Stark law have substantial consequences for all | | | | Physician-Patient Encounters. |
| parties involved, regardless of the intent of the | | | | Members of the group must personally conduct no |
| parties. Sanctions include denial of payment for DHS | | | | less than 75 percent of the physician-patient |
| claims, civil monetary penalties ($15,000 for each claim | | | | encounters of the group practice. |
| submitted plus two times the reimbursement claimed), | | | | Special Rules for Productivity Bonuses and Profit |
| and exclusion from Medicare and Medicaid. In | | | | Shares |
| addition, parties who enter into circumvention schemes | | | | The special rules for productivity bonuses and profit |
| are subject to a civil monetary penalty of up to | | | | shares allow a physician who is in the group practice |
| $100,000 per scheme. | | | | to be paid a share of overall profits of the group or a |
| Group practices are well advised to document their | | | | productivity bonus based on services that he/she has |
| compliance with Stark. Documentation supporting | | | | personally performed (including services “incident |
| compliance is particularly important in today’s health | | | | to” those personally performed services), provided |
| care environment, which has had an increase in | | | | that the share or bonus is not determined in any |
| Federal False Claims litigation and investigations | | | | manner that is directly related to the volume or value |
| stemming from Qui Tam whistleblowers utilizing | | | | of referrals of DHS by the physician. CMS now |
| technical violations of the Stark law as a predicate for | | | | takes the position that diagnostic-testing services |
| False Claims Act violations. | | | | cannot be billed as “incident to” but practices |
| Application of Stark in the Group Practice Setting | | | | that provide physical therapy can, however, bill physical |
| Many common financial relationships can trigger the | | | | therapy services as “incident to” services |
| need for a Stark analysis. This article, however, will | | | | (provided that all of the “incident to” |
| focus on Stark’s applicability in the group practice | | | | requirements are met). |
| context as Stark applies to referrals of DHS within a | | | | The Stark regulations specifically set forth examples |
| group practice. For example, if a physician practice | | | | of formulas that will be deemed not to relate directly to |
| provides services such as physical therapy, clinical lab, | | | | the volume or value of referrals. For example, a |
| x-rays, and/or ultrasounds, within the practice, Stark will | | | | group’s profits will be deemed not to relate directly |
| be implicated. Once the prohibition is triggered, the | | | | to the volume or value of referrals if revenues derived |
| relationship(s) must then fall within a Stark exception. | | | | from DHS are distributed based on the distribution of |
| The in-office ancillary services exception has been | | | | the group practice’s revenue attributed to services |
| arguably the single most important exception in the | | | | that are not DHS payable by any Federal health care |
| Stark law. This exception is designed to protect the | | | | program or private payer. |
| in-office provision of certain DHS that are genuinely | | | | Documentation of Compliance |
| ancillary to the medical services provided by the | | | | Group practices that choose to take advantage of the |
| practice. In order for a physician practice that | | | | special treatment that the Stark law affords them |
| provides DHS to protect its referrals under the | | | | must be prepared to demonstrate compliance with the |
| in-office ancillary services exception, the physicians | | | | regulations. In this regard, if requested by the |
| must first qualify for the group practice | | | | Secretary, group practices are required to provide |
| definition. The group practice definition is not an | | | | documentation of the total time each member spends |
| exception to Stark in and of itself, but any | | | | on patient care services, and to maintain |
| “group” of physicians that want to take | | | | documentation supporting compliance with the |
| advantage of the in-office ancillary services exception | | | | “substantially all” test. The “substantially |
| must be structured to meet the group practice | | | | all” test is intended to guarantee that the group |
| definition. | | | | practice members are providing a substantial amount |
| The Group Practice Definition | | | | of their services through the group. Groups can |
| Under Stark, a group practice is a physician practice | | | | document compliance by any reasonable means, |
| that meets the following conditions: | | | | including without limitation, time cards, appointment |
| Single Legal Entity. | | | | schedules, personal diaries, or other reasonable means |
| The group practice must consist of a single legal entity | | | | that are fixed in advance of the performance of the |
| operating primarily for the purpose of being a physician | | | | services being measured, uniformly applied over time, |
| group practice in any organizational form recognized | | | | and verifiable. Groups are also required to document, |
| by the State in which the group practice achieves its | | | | in writing, a new member’s employment with, or |
| legal status. | | | | ownership or investment in, the group practice before |
| Physicians. | | | | the new relationship commences. |
| The group practice must have at least two physicians | | | | The In-Office Ancillary Services Exception |
| who are members of the group (whether employees, | | | | In order for a group of physicians to provide DHS |
| or direct or indirect owners). Stark defines a member | | | | within the practice, including without limitation, clinical |
| of the group as a direct or indirect owner of a group | | | | laboratory, physical therapy, x-rays, and ultrasounds, |
| practice (including a physician whose interest is held by | | | | the group must first meet all of the requirements of |
| his or her individual professional corporation or by | | | | the group practice definition. If the group practice |
| another entity), a physician employee of the group | | | | definition is met, the group is then eligible to utilize the |
| practice, a locum tenens physician, or an on-call | | | | in-office ancillary services exception to protect its |
| physician while the physician is providing on call | | | | in-office DHS referrals. The in-office ancillary |
| services for members of the practice. An | | | | exception exempts services personally provided by |
| independent contractor is not a member of the group. | | | | the referring physician, a physician who is a member |
| Range of Care. | | | | of the same group practice as the referring physician, |
| Each physician who is a member of the group, must | | | | an individual that is supervised by the referring |
| furnish substantially the full range of patient care | | | | physician, or if the referring physician is in a group |
| services that the physician routinely furnishes, including | | | | practice, by another physician in the group practice, |
| medical care, consultation, diagnosis, and treatment, | | | | provided that the supervision complies with all of the |
| through the joint use of shared office space, facilities, | | | | Medicare payment and coverage rules for the |
| equipment, and personnel. | | | | services. In addition, the exception contains a location |
| Services Furnished by Group Practice Members. | | | | and a billing requirement. |
| Substantially all of the patient care services of the | | | | Conclusion |
| physicians who are members of the group (that is, at | | | | This article is intended as only a brief summary of the |
| least 75% of the total patient care services of the | | | | Stark II Phase II Final Regulations in connection with the |
| group practice members) must be furnished through | | | | in-office provision of DHS within the group practice |
| the group and billed under a billing number assigned to | | | | context. Physicians and groups that provide DHS |
| the group, and the amounts received must be treated | | | | should also be mindful that many other common |
| as receipts of the group. Patient care services must | | | | financial relationships may also trigger Stark, including, |
| be measured by one of the following: | | | | without limitation, (1) lease agreements for space and |
| - the total time each member spends on patient care | | | | equipment; (2) medical director agreements; and (3) |
| services documented by any reasonable means (for | | | | physician employment contracts with group practices |
| example, time cards and appointment schedules.) | | | | and hospitals. |