I have some excerpts from the American Medical Directors Association's (AMDA) website regarding the Stark Law:
1. What is the Stark Law?
Generally speaking, the Stark Law, which is located in Section 1877 of the Social Security Act, prohibits a physician from referring Medicare or Medicaid program patients for certain "designated health services" to an entity with which the physician or an immediate family member has a "financial relationship."
2. What are the "designated health services"?
The "designated health services" covered by the Stark Law include:
- clinical laboratory services
- physical therapy, occupational therapy, and speech language pathology services
- radiology and certain other imaging services
- radiation therapy services and supplies
- durable medical equipment and supplies;
- parenteral and enteral nutrients, equipment, and supplies
- prosthetics, orthotics, and prosthetic devices and supplies
- home health services
- outpatient prescription drugs
- inpatient and outpatient hospital services
Additionally, in final regulations released on November 21, 2005, the Centers for Medicare and Medicaid Services (CMS) announced its decision to make nuclear medicine a "designated health service" under the Stark Law.
3. What is a "financial relationship"?
Under the Stark Law, a "financial relationship" can be either (a) a direct or indirect "ownership or investment interest" in the entity that furnishes designated health services or (b) a "compensation arrangement" between the physician and the entity. Therefore, unless a Stark exception is fully satisfied, a physician who is part owner of a rehabilitation clinic may not refer a Medicare or Medicaid patient to the clinic for rehabilitation services and the clinic may not bill for those services. Likewise, if a physician is compensated as a medical director by a SNF, the SNF may not bill the Medicare or Medicaid program for designated health services referred by that physician unless the medical director arrangement meets a Stark exception (see question #5 on Stark Law exceptions). If there are a number of "financial relationships" between a physician and an entity, each relationship must meet a Stark exception in order for the physician to appropriately refer patients to that facility for designated health services.
4. What is considered a "referral" under the Stark Law?
The Stark Law defines the term "referral" much more broadly than the generally accepted definition in the standard physician-patient relationship. Under the Stark Law, a "referral" can include (a) a physician's request for, ordering of, or certifying or recertifying the need for, any "designated health service" reimbursable under Medicare Part B, including a request for a consultation with another physician and any test or procedure ordered by or to be performed by that other physician or under the physician's supervision; or (b) a physician's request that includes the provision of any designated health service, the establishment of a plan of care that includes the provision of a designated health service, or the certifying or recertifying of the need for such a designated health service. However, a "referral" does not include services personally performed or provided by the referring physician.
5. What are the Stark Law exceptions?
Stark Law contains approximately 35 exceptions that describe acceptable financial relationships that allow a physician to refer to an entity for the provision of designated health services. The first group of exceptions can be applied to either "ownership or investment interests" or "compensation arrangements." The second group of exceptions apply only to "ownership or investment interests." The third group of exceptions apply only to "compensation arrangements." Some commonly applied exceptions to the Stark Law include the exceptions for (a) in-office ancillary services, (b) bona fide employment relationships, (c) physician recruitment, and (d) physicians practicing in rural areas and locations designated as Health Professional Shortage Areas. It is important to remember that even these exceptions only apply in limited circumstances. For example, the Stark Law exception that covers a medical director agreement with a skilled nursing facility would not cover the medical director's ownership of that facility. A separate Stark law exception would need to be satisfied. Physicians should consult a lawyer to help determine which exception fits their proposed financial relationships.
Additional information on Stark Law exceptions may be found by visiting the CMS website at
http://new.cms.hhs.gov/MedlearnProducts/40_PhysSelfReferral.asp, or by referring to the Code of Federal Regulations at 42 CFR §411.355 through 42 CFR §411.357.
13. What are the requirements for "personal services exception" to the Stark Law?
Generally speaking, for the personal services exception to be satisfied an agreement for a physician's services must:
- be in writing, be signed by the parties to the agreement, and specify the services covered by the agreement
- cover all of the services to be furnished by the physician under the arrangement
- cover aggregate services that do not exceed those that are reasonable and necessary for the legitimate purposes of the arrangement
be for a term of at least one year
- provide for compensation to be set in advance, not to exceed "fair market value," and (except in the case of a permissible physician incentive plan) not be determined by the volume or value of any referrals or other business generated between the parties
- not involve counseling or promotion of a business arrangement or other activity that violates any state or federal law, such as the federal Anti-kickback Statute.
15. Under the Stark Law, may a physician become an owner or co-owner of a [clinic] where he or she is a medical director?
A physician may perform duties as a medical director at a facility he or she co-owns, but the physician must find a Stark Law exception for both the medical director arrangement and the physician's ownership interest in the facility itself. The medical director arrangement should be crafted to satisfy the "personal services exception," discussed above. Finding an exception for the physician's ownership interest in the facility could prove much more difficult. Unfortunately, there are very few exceptions for a physician's ownership interest in a nursing facility, such as a SNF. Unless the facility is in a rural area or a Health Professional Shortage Area, the physician's options appear to be limited. Any physician considering investing in a nursing facility should immediately consult an attorney to analyze how the Stark Law will impact the proposed arrangement.
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After reading the above information, I conclude the following: a podiatrist that has a physical therapist working under him or her DOES violate the Stark Law, UNLESS the podiatrist's arrangement with the physical therapitst meets the "personal services exception" requirement of the Stark Law (see excerpt #13 above). For example: a podiatrist may own the rehab facilities, and rent out the space to the physical therapist, but the podiatrist may NOT have the therapist simply working for him or her. If I am incorrect, than somebody please correct me.
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