When Is A Physician Liable for Stark Law Violations?

I frequently hear attorneys claim that the Stark law applies equally to hospitals and physicians. This position is sometimes taken in the process of negotiating a transaction between a hospital and a physician or physician group. In this context it is limited to simple posturing to attempt to get a better financial deal in the negotiated arrangement. This position takes on a different and much more serious repercussions when this position is taken in the context of a potential compliance violation that is being addressed.

Let me make it clear that the Stark law applies to physicians. It applies when physicians are the provider of designated health services. It also potentially applies to physicians when they make referrals to hospitals or other providers of designated health services. However, in referrals to other providers of designated health services, such as hospitals, the potential liability to the physician under the Stark Law is much different and more remote than the liability of the hospital.

The Stark Law applies in a much different way for the referring physician than it does for the provider of designated health services such as the hospital. The bottom line is that the physicians are subject to much less risk and are much less likely to be subject to penalties or sanctions for violating the Stark law.

Statements that physicians and hospitals are both potentially “on the hook” under the Stark law are incomplete and often disingenuous. Statements that physicians and hospitals are “in the same boat” or are “equally at risk” under the Stark are simply untrue in most common cases that are not intentional attempts to circumvent the Stark Law in some way.

To illustrate,  it is important to look at what the Stark law prohibits and what sanctions are provided for the violation. The primary sanctions for violating the Stark law is denial of payment of any designated health services that flow from referrals that are made in violation. The Stark law is primarily a payment ban that is effective regardless of intent. If there is a financial relationship with the physician and no exception exists to permit the referral, there is a violation and the provider of the designated health service is denied the right to seek payment for the prohibited services.

The Affordable Care Act attaches additional penalties under the Federal False Claims Act if repayment is not made within 60 days after the designated health service provider discovers that an over-payment occurred as a result of the Stark law infraction. Penalties for failing to make timely repayment include triple the amount of the improper payment plus an additional $11,000 per claim. In many cases the potential exposure to the designated health service provider can be astronomical and can be large enough to threaten the potential viability of their business. However, it is significant to note that none of this exposure falls on the referring physician if the referring physician does not bill for the designated health service. In the typical case involving a hospital/physician relationship, the liability exposure only falls on the hospital for the payment denial and false claims act liabilities.

This is the source of a common misconception among physicians and even some hospital attorneys. The physician is not subject to the primary sanction for violating the Stark law which is repayment of amounts received for tainted services.  This has been confirmed multiple times by the Center for Medicare and Medicaid Services.  In comments to the Stark law regulations, CMS stated that the Stark statutory scheme already protects physicians from any liability in the absence of actual knowledge, reckless disregard, or deliberate ignorance (in connection with circumvention schemes). The basic statutory sanction is this loss of claims or bills which affects the DHS entity, not the referring physician.  69 fed. Reg. 16062

Physicians are not totally off the hook from any implications of the Stark Law though. The Stark law provides that physicians can be subject to substantial civil monetary penalties and exclusion from the Medicare program if the physician participates in a circumvention scheme that the physician knows or should know has a principal purpose of assuring referrals by the physician to a particular entity to which the physician could not refer to directly without complying with the Stark Law.  In other-words, physicians are only directly liable if they participate in schemes to work around the Stark Law.

So the next time you hear someone say that the Stark Law applies just as much to physicians as it does to hospitals, you will know whether or not the statement is correct.

Mountain of New Regulations Issued By CMS

Just a tip to my colleagues in health care law.  Do not send these new regulations to printer before giving them an eyeball.  They are long and if you share a printer you will be buying coffee for your colleagues for at least a week.

True to their nature, there are a number of things that are unrelated to physician payment scattered throughout this poorly indexed document.  We have new Stark Law exceptions, changes to “incident to” billing rules, telemedicine reimbursement standards, and a whole host of additional little morsels that we health care attorneys need to locate, study, and update our clients on; all before the next guy down the street beats us to the rap.On November 16, 2015, the Department of Health and Human Services officially published their final rules Revising Payment Policies Under the Physician fee Schedule and Other Revisions to Part B for CY 2016.

Have a pleasant rest of your week gang.  Anyone who does not want to wade through all of these regulations can come on back to this blog as we post articles on various pieces of the new rules.

And remember; here at Ruder Ware, Health Care Never Sleeps!

New regulations issued by the Center for Medicare and Medicaid services on November 16, 2015 change the way that services that are furnished “incident to” the service of a physician must billed. The new regulations provide clarification that the billing provider must be the provider that actually supervises the incident to service.

Previously, regulations stated that the physician supervising the auxiliary personnel need not be the same physician upon whose professional service the “incident to”services base. The provisions in previous regulations that permitted another physician to supervise the incident to service have been removed. Now, the physician who is actually available and actually supervises must be the party whose billing number is connected with the incident to service.

The service that is performed “incident to” the services of a physician can generally be billed at 100% of the physician’s rate under the Medicare fee schedule.  However, supervision and billing standards must be complied with to avoid creating a compliance issue and potential overpayment.

All providers must look at their billing policies and procedures to be certain that they integrate the new “incident to” billing standards into their compliance policies and procedures and appropriately implement the new standard through proper training of their billing staff, physicians and support staff.  This is also a good time to refresh provider training on the extent of supervision that is required in various care settings.