Most physicians that I work with are vaguely aware of the Stark and Anti-Kickback laws. To them, it has something to do with business arrangements and getting or giving kickbacks, and that is about the limit of their knowledge. For employed physicians, that may suffice, but almost all physicians will at some point have an opportunity to own a practice, invest in a diagnostic or surgery center, or own part of a building that leases to medical providers. As a result, you need to understand enough about these laws so that a buzzer goes off in your mind in certain situations, and then you can make sure that an attorney is specifically responsible for compliance with these laws.

Let’s start with what constitutes a violation of the Anti-Kickback and Stark Laws, so that you know when your mental buzzer should go off.

Anti-Kickback: It is illegal to:

  1. knowingly or willingly (so ignorance can be a defense)
  2. offer, pay or receive compensation
  3. in cash or in kind (such as services)
  4. in exchange for referring an individual or providing or arranging for a good or service
  5. for which payment may be made under Medicare or Medicaid.

Basically, any kind of kickback, rebate, gift, payment, discount, savings, etc. received or paid in exchange for referring or receiving Medicaid/Medicare business is a violation of this law. Examples include receiving money from a pharmaceutical company in exchange for starting a patient on their drug, or leasing a building to a physical therapist at a discount in exchange for referrals from the physical therapist.

Stark: A physician cannot refer any designated health services payable by Medicare or Medicaid to an entity within which the physician or an immediate family member has a financial relationship, and the entity cannot bill for such referred services. Note that the “financial relationship” can be direct or indirect and can include compensation arrangements as well as ownership. The designated health services component reduces the application of this law significantly, but it is nonetheless necessary to pull up the list of designated health services to make sure that a proposed arrangement doesn’t involve designated health services.

Fortunately, there are “safe harbors”, formally written into law, which provide that if you strictly follow the safe harbor, then the Anti-Kickback or Stark law, as applicable, is not violated. I am not going to go into those in detail, but what you need to understand is that most arrangements in which money or services are changing hands within the medical industry can be crafted to fit within a safe harbor, and most safe harbors require that the arrangement be in writing, last at least one year, and that the compensation not be related to the volume or value of the referrals, but rather tied fair market value. For example, the “space rental” safe harbor to the Anti-Kickback statute requires the lease to be in writing, last at least one year, rent must be tied to fair value and not based on the volume or value of referrals of Medicaid/Medicare business, and that the space rented does not exceed the amount reasonably needed by the tenant.

It is also important to understand that while the Anti-Kickback statute requires the physician to knowingly or willingly violate the law, the Stark statute does not require any knowledge or willfulness. Rather, even unknowingly or accidentally violating the Stark law can result in prosecution. On the other hand, while violating either law can result in a fine, only Anti-Kickback statute violations can result in jail time.

Finally, in addition to the Anti-Kickback and Stark laws, there are also federal false claims laws and state equivalents to all of these statutes, at least in most states.  So before you dive into that great sounding lease arrangement with a friend’s practice, or buy into a diagnostic center, make sure that you have an attorney discuss the arrangement with you from an Anti-Kickback and Stark law compliance perspective.

-Richard

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