In 1992, Congress passed a prohibition on physician self-referral. This prohibition is often called the Stark Law. The law was expanded in scope in 1995, and it now rests under the Centers for Medicare and Medicaid Services (CMS). The CMS fraud and abuse laws make healthcare fraud a federal crime. Awareness of the personal service exemption of the Stark law is important for physicians in all geographic and medical areas of practice.
The Stark law prevents doctors from referring patients to the Department of Human Services if the doctor has a financial relationship with the healthcare entity, the doctor’s immediate family member and the healthcare entity. This law defines a financial relationship as any equity, debt or interest in ownership in the facility. It also includes investments in the facility providing the healthcare services. According to the law, financial relationships of compensation are also prohibited. This includes compensation between the doctor or their immediate family member and the healthcare entity. An immediate family member includes the doctor’s sibling, spouse, parent or child. On the surface, this law is broad. However, there are many exceptions to the Stark law. The personal service exception is a common one.
Federal statute 42 CFR 411.357(d)(1) outlines the personal service exemption of the Stark law. The personal service exemption to the Stark law refers to allowing payments to a physician if they provide specific services to for-profit and nonprofit healthcare centers, such as a nonprofit blood donation center or a private healthcare practice. The personal services must be specified in a written and signed agreement. A list of the physician or their immediate family member and the services they provide must be maintained by the healthcare entity and provided at the request of CMS, the Department of Justice or the Department of Health and Human Services.
The services provided by the doctor or their immediate family member can’t exceed reasonable services for legitimate business reasons. The duration must be at least one year, and the compensation must be set in advance. Compensation can’t exceed fair market value. Compensation can’t take into account the number of referrals made by the doctor. Personal service exemptions don’t include any business arrangements or activities that are illegal under state or federal law. The law also permits a six-month holdover past the end of the contract between the physician and the healthcare entity.
Most physicians and other healthcare providers support the Stark law because it prevents fraudulent or unneeded medical services, tests and referrals. It also prevents doctors from trying to get personal financial gains or equity in facilities that care for their patients. In essence, it prevents conflicts of interest. The Stark law does have some impacts on a doctor’s ability to make healthcare decisions and deliver services. Because of this, some physicians have protested the law. Most doctors can do their jobs without violating the law, but it does take extra time and due diligence for physicians and clinic managers.
The CMS, Department of Health and Human Services and Department of Justice have joint responsibilities in investigating violations of the Stark law. changes to the Affordable Care Act, HIPAA and other healthcare laws have led to tougher applications of the Stark law. Violations of the Stark law may be reported by whistleblowers. They may also be uncovered during audits, billing reviews and other administrative activities at the state or federal level.
The Stark law is considered to be a strict liability law. This means that anyone accused of a crime is responsible for their actions even if they didn’t intend to break the law. Ignorance of the law isn’t an excuse and doesn’t prohibit culpability. If a doctor inadvertently refers a patient to a healthcare entity in which they or their immediate family member has a financial interest, they can be held liable under federal law.
Anyone accused of a violation of the Stark law should meet with an attorney. The personal service exemption covers a lot of situations, and an attorney offers advice about whether or not this exemption could apply to a particular situation.
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