Pediatric Grand Rounds: Case Studies in Stark July 21, 2006

1
Pediatric Grand RoundsCase Studies in Stark
July 21, 2006

• Presented by
• Brigid M. Maloney, Esq.
• U.B. Associates, Inc.

2
Stark Law

• If a physician (or immediate family member) has a
  financial relationship with an entity, then the
  physician may not make referrals
• to the entity for the furnishing of
• designated health services
• (unless an exception applies).

3
Designated Health Services

• Clinical lab services
• Physical therapy, occupational therapy
  speech-language pathology services
• Radiology other imaging services not including
  nuclear medicine (until January, 2007)
• Radiation therapy not including nuclear medicine
• Durable medical equipment and supplies
• Prosthetics, orthotics prosthetic devices
  supplies
• Home health services
• Outpatient prescription drugs
• Parental/enteral nutrients and PEN-associated
  equipt supplies.
• Inpatient hospital services
• Outpatient hospital services

If a physician (or immediate family member) has a
financial relationship with an entity, then the
physician may not make referrals to the entity
for the furnishing of designated health
services, and the entity may not submit a bill
for the furnishing of any such services.
4
Referrals

• A referral is a request by a physician for an
  item or
• service for which Medicare Part B may pay,
  including a
• request for a consultation (including any tests
  ordered by the
• consultant).
• A referral does not include a request for a DHS
  item or service
• that is provided or performed by the referring
  physician.

If a physician (or immediate family member) has a
financial relationship with an entity, then the
physician may not make referrals to the entity
for the furnishing of designated health
services, and the entity may not submit a bill
for the furnishing of any such services.
5
Financial Relationship

• Compensation Arrangement
• --or--
• Ownership or Investment Interest

If a physician (or immediate family member) has a
financial relationship with an entity, then the
physician may not make referrals to the entity
for the furnishing of designated health
services, and the entity may not submit a bill
for the furnishing of any such services.
6
Compensation Arrangement

• Direct or indirect remuneration between a
  physician and an entity, overtly or covertly,
• in cash or in kind.

If a physician (or immediate family member) has a
financial relationship with an entity, then the
physician may not make referrals to the entity
for the furnishing of designated health
services, and the entity may not submit a bill
for the furnishing of any such services.
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Compensation Arrangements -- Examples

• Physician employment arrangements
• Physician professional service agreements
  (e.g., independent contractor agreements)
• Medical director agreements
• Lease of office space or equipment
• Lease of time or a per service lease with an
  MRI imaging center.

8
Compensation Arrangements--Exceptions

• Office space and equipment rentals
• Bona fide employment relationships
• Personal service arrangements
• In-office ancillary services

9
Exceptions

• To qualify for most exceptions, the arrangement
  must
• be set in advance
• be in writing, with specific terms and
  conditions
• be for a term of at least one year
• be fair market value for the services
  rendered
• NOT take into account the value or volume of
  
• referrals made between the parties.
• Except employment in-office ancillary services

10
Employment Exception

• Employment is for identifiable services
• Compensation is FMV
• Compensation not determined in a manner that
  takes into account the volume or value of
  referrals by the referring physician
• Compensation is commercially reasonable

11
In-Office Ancillary Services

• Physicians may be able to refer patients for
  in-office
• ancillary services within own group provided the
• Stark group practice definition is met.
• To qualify, the services must be furnished
• (1) personally by the referring physician,
• (2) by a physician who is in the same group
• practice, or
• (3) by individuals who are "directly
• supervised" by one of those physicians.

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Case Study 1

• Hospital pays Dr. Jovial the Surgeon to see
  patients
• in the hospital clinic, four sessions per week.
  Many
• of the clinic patients eventually undergo surgery
• within the hospital. This arrangement has been in
• place for many years and there has never been any
• need for a contract because both the hospital and
  Dr.
• Jovial have always held up their ends of the
  bargain.
• The compensation paid to Dr. Jovial is FMV.

13
Case Study 1

• Financial Relationship
• Clinical compensation.
• Referral
• Surgical patients referred to the hospital.
• DHS
• Inpatient/outpatient services.
• Exception
• Personal services exception does not apply
  because there is no
• written contract.

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Case Study 2

• Dr. Friendly the Family Doctor is employed by
  and
• receives a set annual salary from a group
  practice.
• The group practice owns an x-ray machine, which
  is
• located in the same building where the group sees
  its
• patients. When necessary, Dr. Friendly sends his
  
• patients down the hall for x-rays rather than
  referring
• them to an outside entity. The x-ray machine has
• been an excellent source of revenues for Freddys
• group.

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Case Study 2

• Financial Relationship
• Compensation/Employment
• Referral
• Patients referred for x-rays.
• DHS
• Radiology.
• Exception
• In-office ancillary services exception permits
  group
• practice physicians to refer patients for
  ancillary
• services performed in the same building where
• the group practice is located.

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Case Study 3

• Dr. Happypants uses office space and an
  examining
• room in a hospital to see both hospital clinic
  patients and
• private patients. Her group practice bills and
  collects on
• the private patients while the hospital bills and
  collects on
• the clinic patients. There is no formal written
  lease but
• the space is compensated through offsets from the
  clinic
• billings. Dr. Happypants refers all of the
  patients in need
• of lab work to the hospital lab because it is
  nearby and
• convenient for the patients.

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Case Study 3

• Referral
• Patients referred to the lab.
• DHS
• Clinical lab services.
• Financial Relationship
• Use of office space (direct or indirect
  remuneration between a physician and an entityin
  cash or in kind.)
• Exception
• Lease exception does not protect this arrangement
  because
• the requirement that the lease be in writing is
  not met.

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Case Study 4

• A hospital wishes to hire Dr. Steadihands, a
  well-respected
• pediatric surgeon. The hospital knew that
  contracting
• with Dr. Steadihands would mean a large increase
  in
• referrals because Dr. Steadihands was a
  well-known
• surgeon in the area. As an incentive to Dr.
  Steadihands,
• the hospital offered him an attractive salary
  plus bonus
• package. The bonus would be based on the number
  of
• patients Dr. Steadihands referred to the hospital.

19
Case Study 4

• Financial Relationship
• Employment/Salary plus bonus.
• Referral
• Patients would be referred to the hospital.
• DHS
• Inpatient and outpatient hospital services.
• Exception
• The employment exception would not apply because
  his
• compensation varies with the number of referrals
  he makes to
• the hospital.

20
Case Study 5

• A physician group that refers many patients to
• various community labs have decided to open
• a lab of their own. The plan was simple
• operate an off-site lab, refer all their patients
  to
• that lab, and enjoy the profits from all of the
• business they refer to their lab.

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Case Study 5

• Financial Relationship
• Ownership interest.
• Referral
• Patients referred to the lab.
• DHS
• Clinical lab services.
• Exception
• None.

22
Case Study 6

• Dr. Wedlock is a podiatrist who has a small
• suburban practice. Dr. Wedlocks wife is employed
  
• as a receptionist at a local hospital where Dr.
• Wedlock refers all of his patients. Mrs. Wedlock
  
• doesnt have a written employment agreement but
• her salary and job duties are FMV and consistent
• from year to year.

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Case Study 6

• Financial Relationship
• Employment of immediate family member.
• Referral
• Patients referred to the hospital.
• DHS
• Inpatient/Outpatient hospital services.
• Exception
• Employment exception probably applies.

24
Case Study 7

• A physiatrist is paid under a contract with a
  hospital for
• clinical services he provides in the Rehab Unit.
  Many of
• his patients are referred for PT/OT/ST within the
• hospital. The contract is in writing,
  compensating him at
• FMV, with a term of 2 years.
• The physiatrist sees private patients in the
  clinic as well,
• for which his group practice bills and collects.
  As a
• convenience to him, and to ensure that he is
  available to
• the hospital when needed, the hospital permits
  the
• physiatrist to share a nurse, a receptionist, and
  office
• supplies and equipment free of charge while he is
  seeing
• his private patients.

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Case Study 7

• Financial Relationship
• (a) Compensation/contract
• (b) Compensation/space supplies
• Referral
• (a)Patients referred to the lab.
• (b) Patients referred for therapy services.
• DHS
• (a) Clinical lab services (b) therapy services.
• Exception
• (a) Personal services exception
• (b) Space equipment lease exception not
  satisfied.

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• Brigid M. Maloney, Esq.
• General Counsel
• U.B. Associates, Inc.
• 3435 Main Street, BEB Rm. 149
• Buffalo, New York 14214
• [phone]
• bmaloney_at_buffalo.edu