Kusserow’s Corner: The Stark Law Remains an Enforcement Priority

The Physician Self-Referral Law, commonly referred to as the Stark Law, prohibits physicians from referring patients to receive “designated health services” payable by Medicare or Medicaid to entities with which the physician or an immediate family member has a financial relationship, which includes compensation arrangements. The Stark Law is a strict liability statute, which means proof of specific intent to violate the law is not required. The HHS Office of Inspector General (OIG) indicated in a March 2009 letter that it will no longer accept under the self disclosure protocol pure Stark-related liability issues. Instead, the disclosure must have some type of colorable anti-kickback violation associated with the disclosure. The letter indicated the OIG was realigning its resources to go after larger violators of the Stark and anti-kickback laws and called for providers with Stark issues to self-disclose to CMS.

Many drew the inferences that the OIG and Department of Justice (DOJ) enforcement interest in pure Stark-related violations had diminished.  Proof that this was not the case was dramatically demonstrated this week by the Tuomey Healthcare System trial.  This case was brought by a qui tam relator to the DOJ as a strict Stark Law matter.  The Anti-Kickback Statute was not part of the case.  After a four-week do-over trial, a jury concluded Tuomey violated the Stark Law and, as a result, the False Claims Act by submitting tens of thousands of illegal bills to Medicare worth $39 million. The jury found that Tuomey improperly compensated 19 specialty doctors whom hospital executives allegedly feared would divert lucrative patients to other hospitals or doctors’ offices.

This case sends a powerful message to hospitals that having a corrupt arrangement with physicians not only implicates the Anti-Kickback Statute, but the Stark Laws, as well.  In light of this case, the following suggestions are offered:

  1. Ensure there is an arrangements database that includes all the key elements to evidence the nature and conditions of any contract with a referral source (i.e. physicians).  Although this is not required, it is a best practice.  The OIG mandates such a database in all its corporate integrity agreements (CIAs) involving physician contracts.
  2. Establish an ongoing monitoring of physician arrangements to ensure they are operating according to law and regulation.
  3. Ensure there is outside, independent, ongoing auditing of arrangements for compliance with the Stark Law (and Anti-Kickback Statute).  Particular attention should be given to Fair Market Value determinations; meeting the “Commercially Reasonable” standard; and evidence of performance under the contracts.

Richard P. Kusserow was the Department of Health and Human Services Inspector General for over eleven years and was responsible for issuing the original “safe harbor” rules related to the Anti-Kickback Statute. He is the founder and CEO of Strategic Management, a firm that conducts reviews and does FMV determination of physician arrangements on behalf of clients.  For more information, contact him at rkusserow@strategicm.com, or call him directly. Richard now contributes content to the Wolters Kluwer Law and Business Health Law  blog to assist the industry in its understanding of compliance from the perspective of a former Inspector General.

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Copyright © 2013 Strategic Management Services, LLC.  Published with permission.