Stark Law, or the Physician Self-Referral law, is a civil law that restricts physician self-referrals, including by family. Anyone who has close familial ties with a physician and could have a financial stake in their practice cannot refer a Medicare or Medicaid patient to that physician for designated health services (DHS). A number of services count as DHS, from inpatient and outpatient hospital services to physical therapy services.
There are many exceptions to Stark Law. These exceptions are complex and specific to the scenarios they address.
Stark Law is a strict liability statute, meaning that the federal government doesn’t have to prove that you intended to break the law to prosecute you. If a health care provider is caught violating Stark Law, there is no risk of jail time because it is a civil law. However, the penalty fees can be devastating.
Whatever claims a physician filed and was paid for must be paid back. A provider is issued civil monetary penalties of up to $23,863 for each service in violation of Stark. Here’s where it matters whether the law was intentionally violated: if the Office of Inspector General (OIG) discovers that a provider tried to get around the law (known as “circumvention schemes”) or knew they were in violation, they could be charged up to three times the original penalties, plus a fine of up to $100,000. Some health care organizations are found to have hundreds of illegal arrangements, leading to fines of hundreds of millions of dollars. Providers can also be excluded from participating in CMS programs.
Wait, so how does this connect to physician contracts?
You must understand Stark Law if you are working with physician compensation arrangements, because strong documentation that your organization’s arrangements are within Stark Law regulations is the best way to ensure that you will never find yourself in the OIG’s bad books.
A short list of how to stay out of trouble:
- Contracts should outline the relationship with the physician
- Be specific about services provided by the physician in the contract
- Document non-monetary compensation
- Set rates at fair market value (FMV)
- Don’t pay for referrals! It is illegal under the Anti-Kickback Statute – learn more here.
- Audit your contracts
We hope this simplified breakdown of Stark Law and its implications in physician contracting improved your understanding of the government’s involvement in how physicians are paid. If you want to learn more, check out these resources.
Physician contract compliance matters, first and foremost, because breaking federal law comes with hefty fines. To give a recent example, a Montana hospital paid $24M to the federal government for violating the False Claims Act, Stark Law and the Anti-Kickback Statute. And it can get a lot worse than that. Settlements can reach hundreds of millions of dollars, and executives can be held personally responsible. But here’s the kicker: You can be under investigation and not even know it.
The government could be performing an audit on your organization’s physician compliance program without your knowledge. This is due to the False Claims Act, which enables people within your organization, known as “whistleblowers,” to inform the government of non-compliant practices. If there is a lawsuit, whistleblowers even get a share of the settlement.
If you’re performing regular internal audits of your physician agreements and have an organized physician contracting program in place, you will have a better grasp of what you’re spending. A solid understanding of your organization’s financials makes it easier to make informed decisions and ensure your physician agreements fall within federal regulations.
In a nutshell, this underscores the importance of running a tight compliance program. Learn more about how to implement a solid compliance program in which you define, determine and document FMV here.
The Department of Health and Human Services announced a “regulatory sprint to coordinated care” in June 2018, a new initiative to remove regulatory barriers that impede the transition to a coordinated, value-based health delivery system. The debate includes a discussion on the impact of Stark and AKS regulations. This summer, government agencies have been attacking these questions head on. Two Requests for Information have been published and CMS held their comment period on Stark, or the Physician Self-Referral Law. The OIG has focused primarily on AKS and how to add or alter AKS safe harbors. The comment period will end at 5pm on October 26.
It is unclear how AKS and Stark rules impede value-based care. Many argue that laws like AKS were written with a pay-for-service model in mind, and not the pay-for-performance model that today’s health leaders are working to build. Gainsharing and co-management agreements are two of the types of physician agreements that must be structured carefully to address potential regulatory concerns. The OIG aims to gather feedback on the details and exceptions to AKS that are particularly difficult for health care organizations to navigate as well as identify new safe harbors or changes that would actively promote value-based care.
Various organizations have submitted responses to both RFI’s. In response to CMS’s RFI, The American Hospital Association wrote:
To reach the full potential of a value-based system, the Stark compensation regulations must be reframed to meet the objectives of the new system, through the creation of a new exception designed specifically for value-based payment methodologies, and reforms to the personal services, employment, and risk sharing exceptions.
What should we expect moving forward? For now, officials only seem to be considering small adjustments to the laws and regulations, in response to the large number of comments from industry leaders. How far they’ll go after that, we’ll have to wait and see.
If you are looking for a valuation firm to support your organization’s compliance program, you’re going to want to do a thorough investigation of each firm under consideration before making your decision. The following guide will help ensure you get the essential information you need.
The National Association of Certified Valuation Analysts (NACVA) provides two types of credentials: the Certified Valuation Analysts (CVA) and Accredited Valuation Analysts (AVA) credentials. Take note of the credentials of the consultants you are considering.
Ask direct questions about a valuation consultant’s experience in your field. How many opinions have they done? Do they have healthcare-specific experience? This is important! Each industry is different, and healthcare compliance comes with numerous unique complexities. The valuation firm you choose should be knowledgeable and experienced when it comes to physician valuations.
Evaluate Their Work
Don’t be afraid to put a consultant to the test. Can they talk about their methodology and how they reached their conclusions? Are you comfortable with that methodology? Do they explain themselves in a clear and concise way? Be wary of too much jargon; a trustworthy expert will be straightforward with you. It is an asset if they are willing to talk to a counterparty, such as a physician, during negotiations. In the case of an audit or an external investigation, it is vital that your organization is working with a firm that can defend and justify its work.
Look at Examples
Ask for a redacted valuation. Is the opinion well-written, focused, and concise?
Examine the firm’s disclaimers. They should be sensible and minimal, without too many caveats.