Referral Quicksand in Healthcare: Self-Referrals, Stark Law, and Group Practices
Quicksand Healthcare: Self-Referrals, Stark Law, and Group Practices
One of the most common concerns that we see with medical professionals who own their practices is how to deal with the feared Stark Law and Anti-Kickback statutes. There almost seems to be an air of mystery and dread around those two regulations, due to a reasonable lack of understanding (who does understand these things, really?), and the potential penalties at stake. There is precedent for million dollar + paybacks and punishments if practices do not handle these procedures properly.
Our goal with this article is to remove some of the fear that is associated with a common part of these regulations. We will focus primarily on the Stark Law and one of its most common exceptions, known as the “Group Practice” exception.
Let’s start with some baseline knowledge. The Stark Law is the statute that is meant to prevent medical professionals from referring patients to themselves for profit. The idea is that if medical professionals are allowed to self-refer, then they are economically motivated to prescribe medications or procedures that are not medically necessary, but that may benefit them financially. This rule not only applies to literally referring a patient to oneself, but also referring patients to a hospital or practice in which a doctor has a financial stake. Yes, that means that Stark prevents doctors from referring patients to practices in which the doctor (or an immediate family member) has ownership or is employed. All of those scenarios fall under the broad umbrella of ‘self-referrals.’
Importantly, though, the Stark Law does not outlaw all self-referrals, but instead bans self-referrals for procedures that will be paid for by Medicare or Medicaid, and that are considered Designated Health Services (DHS). The statute[1] defines DHS with an expansive list[2], which has been interpreted in an even more broad manner.[3] The general go to analysis is that if you are performing services which can or will be reimbursed by Medicare or Medicaid, then Stark Law will most likely apply.
Does this mean that all self-referrals for Medicare or Medicaid services are banned? Nope, and that brings us around to the purposes of our article today. There are exceptions to Stark Law, and you can take advantage of them. Perhaps the most prominent and talked about exception is the Group Practice exception.
In a nutshell, physicians can make referrals for DHS to other physicians (or themselves) in the same group practice.[4] This seems pretty simple in and of itself, right? You can refer patients to your colleagues or yourself if you work in the same group practice.
Naturally, and unsurprisingly, the Federal Government found a way to make the matter far more complex and tedious than it would seem at first glance. They have given regulations and rules further defining both who counts as working for a Group Practice, and what qualifies as a Group Practice in the first place.
Fortunately, the definition of somebody working for a Group Practice is relatively simple. A physician who is an owner or an employee qualifies as working for the Group Practice, as well as even locum tenens and on call physicians.[5]
The real fun begins when we try to define a Group Practice itself. The regulations give an 8-step (really, we’re not joking) process for defining what counts as a Group Practice.[6] Then, each of those 8 steps has its own elaboration and details on how to comply with it. The American Medical Association’s analysis of the 8 steps took up 8 pages in and of itself.[7]
However, we will spare you the migraine of sifting through the details of those steps, and instead talk about them on basic terms. In order to be a Group Practice, for Stark Law purposes:
The Group Practice must be a single legal entity (e.g. a partnership or an LLC). No legal entity families, parent companies, etc
There must be two or more members of the Group Practice.
Each physician who is a member of the Group Practice must offer a full range of patient care services. There is not a ton of information detailing what counts as a full range of services, except that it should include consultation, diagnosis, and treatment.
At least 75% of the total patient care provided by the physicians must be furnished through the Group Practice. Yes, this is confusing. This means in the aggregate, so that if 4 physicians dedicate 100% of their patient care time to the Practice, and a fifth physician only dedicates 50% of her or his time, the Group Practice would still qualify, because in total the 5 physicians spend 90% of their patient care time in the Group Practice.[8]
Members of the Group Practice must provide or conduct at least 75% of the physician patient encounters.
The Group Practice must be a unified business- meaning that it makes decisions as a whole, and not as a bunch of individuals who happen to be in the same building.
The Group Practice must distribute expenses and income according to formulas that were determined before the receipt of payment for services that incurred the expenses. The idea for this one seems to be that the Group Practice must determine these things ahead of time, like an ordinary business would, similar to the unified business idea.[9]
Lastly, in a Group Practice, physicians cannot be compensated purely for the number or value of referrals. That said, there are ways to compensate Group Practice physicians for productivity.
There you have it. If your group follows those rules, it can qualify as a Group Practice for Stark Law purposes. Bringing it back full circle, the Group Practice designation is important because it will allow you and your colleagues to refer Medicare and Medicaid services to others in your group without being penalized.
[1] 42 CFR § 411.351
[2] Clinical laboratory services; Physical therapy, occupational therapy, and outpatient 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; 42 CFR § 411.351; https://www.cms.gov/Medicare/Fraud-and-Abuse/PhysicianSelfReferral/List_of_Codes
[3] See, for example, when “physical therapy” was interpreted to include speech language pathology https://www.asha.org/practice/reimbursement/medicare/QAs/#a1
[4] Technically, it is even more complex than that, because physicians can only make Group Practice referrals for “physician services” and “in-office ancillary services” (42 CFR § 411.355(a)(1))( 42 CFR § 411.355(b)(1)), but delving into the nether-realms of those terms is more than is necessary for this article.
[5] 42 CFR § 411.351
[6] 42 CFR § 411.352
[7] https://coa.org/docs/LibraryofWebinars/AMAStarkLawRulesoftheRoad.pdf
[8] Id. At pgs. 24-25 provides some other good examples.
[9] https://www.gosfield.com/images/PDF/DermWorld.To_be_a_Stark_Group_Practice.0915.pdf