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Know Your Stark: A Primer on the Stark Law and How It May Impact Your Reading Agreements
LEGAL COUNSEL
JACQUELINE FINNEGAN, ESQ
Know Your Stark: A Primer on the Stark Law and How It May Impact Your Reading Agreements Hayden Wool, Esq, Jacqueline Finnegan, Esq, Wendy Chow, Esq There is a common misconception that radiologists are not subject to the federal physician self-referral law (the “Stark law”) because, for the most part, they do not “refer” patients. This misconception stems, in part, from the fact that the Stark law exempts from its definition of “referral” a radiologist’s request for diagnostic radiologic services if such services are made pursuant to another physician’s request for a consultation [1].1 If, however, the radiologist orders a study that is not made pursuant to a consultation, the order is considered a referral for Stark law purposes if the study involves one of the Stark law’s designated health services (DHS). More commonly, though, radiologists are affected by the Stark law not because they make referrals for DHS but because they enter into business relationships with physicians or physician groups that refer patients to them. Any arrangement between a radiologist or radiology group and a referral source gives rise to a financial relationship, thus triggering the Stark law. Thus, such arrangements must be properly structured, or any referrals from the physician or physician practice owners to the radiologist or radiology group will be prohibited. The two most common types of arrangements between radiologists and referral sources that implicate the Stark law involve: 1
For this exception to apply, however, the service must be furnished by, or under the supervision of, the referring radiologist or another radiologist in the same group practice. This applies to both radiologists and radiation oncologists.
●
●
leasing or licensing arrangements in which a radiology group makes its space or equipment available to other providers; and contractual arrangements in which a radiologist provides either (or both) the technical component (TC) and professional component (PC) of radiologic and imaging services to other providers.
This article focuses on the underlying agreement that creates the financial relationship: the reading agreement.2 We will address other ways in which the Stark law can impact radiologists and their practices in subsequent articles. STARK LAW PRIMER3
The federal Stark law is a broad prohibition that bans physicians from referring patients to entities with which they (or their immediate family members) have a financial relationship4 for DHS that are paid, in whole or in part, by the Medicare or Medicaid programs, absent an applicable exception [2,3]. DHS include, among other things, the TC and PC of most ra-
diology and imaging services, including, without limitation, MRI, CT scans, ultrasound, x-ray studies, nuclear medicine (including PET), and bone densitometry.5 If the Stark law is violated, the entity billing for the DHS is required to refund all amounts collected as a result of the prohibited referral. In addition, both the referring physician and the entity billing for the DHS may be subject to significant sanctions, including: (1) civil monetary penalties of up to $15,000 for each self-referred service; (2) assessment of treble damages of the amount claimed for each item or service; and (3) exclusion from participation in federal health care programs [5].6 Unlike other fraud and abuse laws, the Stark law is a strict liability statute. In other words, if an existing financial relationship does not fit within an applicable exception, any referrals by a physician for DHS will be deemed to violate the law; the intent of the physician is irrelevant.7
2
We will address other ways in which the Stark law can impact radiologists and their practices in subsequent articles. 3 This article provides an overview of the federal Stark law. Many states have enacted their own versions of the Stark law, so these laws should be reviewed as well. 4 A financial relationship is defined to include direct and indirect ownership or investment interests and direct and indirect compensation arrangements. A compensation arrangement is any arrangement involving remuneration, which is defined to include any payment or other benefit made directly or indirectly, overtly or covertly, in cash or in kind [1,4].
5
CMS publishes a list of the specific radiology and imaging services by Current Procedural Terminology code and CMS Healthcare Common Procedure Coding System code. 6 The government may also impose civil monetary penalties of up to $100,000 for “circumvention schemes” (ie, arrangements in which the principal purpose is to ensure referrals that, if directly made, would be in violation of the Stark law). 7 Both the referral and submission of a claim will violate the Stark law and expose the individual parties to significant fines and penalties.
926 0091-2182/12/$36.00
●
© 2012 American College of Radiology http://dx.doi.org/10.1016/j.jacr.2012.09.020
Legal Counsel 927
IMPACT OF THE STARK LAW ON READING ARRANGEMENTS
One of the more common types of arrangements that radiologists enter into that implicate the Stark law is a radiologic services agreement (commonly referred to as a reading agreement) to provide the PC of imaging services. Generally speaking, these agreements involve a nonradiology physician or physician group that contracts with a radiologist or radiology group to provide the interpretations for the imaging studies that the nonradiology group performs.8 The reading agreement gives rise to a financial relationship between the radiologist or radiology group and the other physician or group. As such, the arrangement between the physician(s) and the radiologist(s) for DHS must meet an applicable exception, or further referrals by the physician(s) to the radiologist(s) will violate the Stark law. With respect to reading agreements, there are generally two potential ways to structure the arrangement: the radiologist can be engaged as a direct employee of the nonradiology group, or the radiologist can be engaged (directly or through the group practice) as an independent contractor. In either type of arrangement, the underlying reading agreement must comply with an applicable exception, the category of which is dictated by the type of financial relationship.9 Direct Employee
If the reading agreement is structured so that the nonradiology group employs the radiologist as a
direct employee, the applicable Stark law exception would be the employment exception [6,7]. Under the “bona fide employment relationship” exception, the employment relationship between an employer and a physician is exempt from the Stark prohibition of referrals if the following conditions are met: ● ●
●
the employment is for identifiable services; the amount of the remuneration under the employment is (1) consistent with fair market value, and (2) does not take into consideration the volume or value of referrals by the referring physician; and the agreement is commercially reasonable even if no referrals were made [7].
Often, however, physician groups prefer to contract with an outside radiologist or radiology group to provide the services, rather than employing the radiologist(s) directly.10 In such cases, the arrangement would need to comply with the Stark law’s exception for independent contractors. Independent Contractor
If the nonradiology group does not hire the radiologist as an employee but rather as an independent contractor, the applicable Stark law exception would be the “personal services arrangements” exception [8,9]. This exception applies regardless of whether the arrangement deals with the radiologist individually or the radiologist’s group. Compliance with the “personal services exception” requires that the following conditions be met:
8
They may also provide supervision of the TC of the services. 9 There are three categories of exceptions: (1) exceptions to ownership arrangements; (2) exceptions to compensation arrangements; and (3) exceptions to both ownership and compensation arrangements.
10
Direct employment may not be feasible because of recent regulations that the nonradiology groups must meet to offer DHS in their practices. This will be discussed in greater detail in a subsequent article.
●
●
●
● ●
the arrangement must be set out in writing and describe the specific services to be provided; the arrangement must cover all of the services to be furnished between the radiologist or radiology group and the entity; the aggregate services contracted for must be reasonable and necessary; the term of the arrangement must be at least one year; and the compensation paid over each term must be set in advance and not exceed fair market value or take into consideration the volume or value of referrals [10].11
Regardless of whether the radiologist is considered a direct employee or an independent contractor (assuming the applicable Stark law exception is met), there are additional Stark law exceptions the referring physician or physician group must satisfy to provide and bill for a service that the physician or group ordered. These issues will be addressed in a subsequent article. OTHER CONSIDERATIONS: ANTIMARKUP RESTRICTIONS ON DIAGNOSTIC IMAGING SERVICES
In addition to ensuring that the reading agreement complies with the Stark law, there are Medicare 11
Although a thorough analysis of the federal antikickback statute (AKS) is outside the scope of this article, we note that radiology reading arrangements must also be in compliance with AKS safe harbors as well. The AKS has two parallel safe harbors to the Stark law’s employee and independent contractor exceptions. If your arrangement is in compliance with either of these Stark exceptions, it will also generally be found to comply with the AKS safe harbors, with one notable exception. If the agreement is structured as an independent contractor arrangement, the AKS safe harbor regulations require that the aggregate amount of compensation be set in advance. This difference effectively prohibits any per-click or per-read arrangement and certain other arrangements that would otherwise meet the Stark exception [10].
928 Legal Counsel
billing restrictions that must also be considered, such as Medicare’s antimarkup prohibition on the TC and PC of diagnostic tests billed by the ordering physician or physician group or supplier (the “antimarkup rule”) [11].12 This is particularly important because the Stark law’s definition of “entity” exempts physician practices that bill Medicare for the TC or PC of a diagnostic test in compliance with the antimarkup rule [1]. Brief Overview of the Antimarkup Rule
The antimarkup rule applies to all diagnostic tests (even those that are not DHS for Stark law purposes) that are ordered and billed by the same physician or physician group or supplier. In such cases, the ordering physician or group or supplier must be deemed to “share a practice” with the physician supervising or performing the TC or PC of the diagnostic test. A physician is deemed to “share a practice” with the ordering or billing physician or physician group or supplier in either of two situations: 12
The antimarkup rule applies to all diagnostic tests, even those that are not DHS for Stark law purposes.
●
●
the supervising or performing physician provides services 75% or more of his or her time on behalf of the ordering or billing group; or the supervising or performing physician provides the service at the same location where the ordering physician provides substantially the full range of his or her services [12].
If neither of these two situations is in place, the antimarkup rule limits what the ordering and billing physician or physician group or supplier may bill Medicare to the lesser of; (1) the supervising or performing physician’s net charge to the billing physician or group or supplier; (2) the billing physician or group or supplier’s actual charge; or (3) the Medicare Physician Fee Schedule amount) [11]. CONCLUSIONS
The purpose of this article is to provide an overview of how the Stark law applies to reading arrangements; we will discuss how the Stark law affects other types of relationships in subsequent articles. Although there are a number of arrangements between radiologists and referring physicians that may
be permissible, it is important to have every aspect of such arrangements reviewed to ensure that the entire arrangement is in compliance with the Stark law (as well as other applicable federal and state laws). While a preliminary review of a “routine” arrangement may seem unnecessary, it is far more cost effective to properly structure an arrangement at the front end rather than to try to untangle, explain, or, even worse, defend a potentially improper arrangement. Think of it as preventive care.
REFERENCES 1. 42 CFR § 411.351. 2. 42 USC § 1395nn. 3. 42 CFR § 411.350 et seq. 4. 42 CFR § 411.354. 5. 42 USC § 1395nn(g). 6. 42 USC § 1395nn(e)(2). 7. 42 CFR § 411.357(c). 8. 42 USC § 1395nn(e)(3). 9. 42 CFR § 411.357(d). 10. 42 CFR § 1001.952. 11. 42 CFR § 414.50. 12. 42 CFR §§ 414.50(a)(2)(ii)-(iii).
Hayden Wool, Esq, Jacqueline Finnegan, Esq, and Wendy Chow, Esq, are from Garfunkel, Wild, PC, Great Neck, New York. Jacqueline Finnegan, Esq, Garfunkel, Wild, PC, 111 Great Neck Road, Great Neck, NY 11021; e-mail: [email protected].
JACQUELINE FINNEGAN, ESQ
Know Your Stark: A Primer on the Stark Law and How It May Impact Your Reading Agreements Hayden Wool, Esq, Jacqueline Finnegan, Esq, Wendy Chow, Esq There is a common misconception that radiologists are not subject to the federal physician self-referral law (the “Stark law”) because, for the most part, they do not “refer” patients. This misconception stems, in part, from the fact that the Stark law exempts from its definition of “referral” a radiologist’s request for diagnostic radiologic services if such services are made pursuant to another physician’s request for a consultation [1].1 If, however, the radiologist orders a study that is not made pursuant to a consultation, the order is considered a referral for Stark law purposes if the study involves one of the Stark law’s designated health services (DHS). More commonly, though, radiologists are affected by the Stark law not because they make referrals for DHS but because they enter into business relationships with physicians or physician groups that refer patients to them. Any arrangement between a radiologist or radiology group and a referral source gives rise to a financial relationship, thus triggering the Stark law. Thus, such arrangements must be properly structured, or any referrals from the physician or physician practice owners to the radiologist or radiology group will be prohibited. The two most common types of arrangements between radiologists and referral sources that implicate the Stark law involve: 1
For this exception to apply, however, the service must be furnished by, or under the supervision of, the referring radiologist or another radiologist in the same group practice. This applies to both radiologists and radiation oncologists.
●
●
leasing or licensing arrangements in which a radiology group makes its space or equipment available to other providers; and contractual arrangements in which a radiologist provides either (or both) the technical component (TC) and professional component (PC) of radiologic and imaging services to other providers.
This article focuses on the underlying agreement that creates the financial relationship: the reading agreement.2 We will address other ways in which the Stark law can impact radiologists and their practices in subsequent articles. STARK LAW PRIMER3
The federal Stark law is a broad prohibition that bans physicians from referring patients to entities with which they (or their immediate family members) have a financial relationship4 for DHS that are paid, in whole or in part, by the Medicare or Medicaid programs, absent an applicable exception [2,3]. DHS include, among other things, the TC and PC of most ra-
diology and imaging services, including, without limitation, MRI, CT scans, ultrasound, x-ray studies, nuclear medicine (including PET), and bone densitometry.5 If the Stark law is violated, the entity billing for the DHS is required to refund all amounts collected as a result of the prohibited referral. In addition, both the referring physician and the entity billing for the DHS may be subject to significant sanctions, including: (1) civil monetary penalties of up to $15,000 for each self-referred service; (2) assessment of treble damages of the amount claimed for each item or service; and (3) exclusion from participation in federal health care programs [5].6 Unlike other fraud and abuse laws, the Stark law is a strict liability statute. In other words, if an existing financial relationship does not fit within an applicable exception, any referrals by a physician for DHS will be deemed to violate the law; the intent of the physician is irrelevant.7
2
We will address other ways in which the Stark law can impact radiologists and their practices in subsequent articles. 3 This article provides an overview of the federal Stark law. Many states have enacted their own versions of the Stark law, so these laws should be reviewed as well. 4 A financial relationship is defined to include direct and indirect ownership or investment interests and direct and indirect compensation arrangements. A compensation arrangement is any arrangement involving remuneration, which is defined to include any payment or other benefit made directly or indirectly, overtly or covertly, in cash or in kind [1,4].
5
CMS publishes a list of the specific radiology and imaging services by Current Procedural Terminology code and CMS Healthcare Common Procedure Coding System code. 6 The government may also impose civil monetary penalties of up to $100,000 for “circumvention schemes” (ie, arrangements in which the principal purpose is to ensure referrals that, if directly made, would be in violation of the Stark law). 7 Both the referral and submission of a claim will violate the Stark law and expose the individual parties to significant fines and penalties.
926 0091-2182/12/$36.00
●
© 2012 American College of Radiology http://dx.doi.org/10.1016/j.jacr.2012.09.020
Legal Counsel 927
IMPACT OF THE STARK LAW ON READING ARRANGEMENTS
One of the more common types of arrangements that radiologists enter into that implicate the Stark law is a radiologic services agreement (commonly referred to as a reading agreement) to provide the PC of imaging services. Generally speaking, these agreements involve a nonradiology physician or physician group that contracts with a radiologist or radiology group to provide the interpretations for the imaging studies that the nonradiology group performs.8 The reading agreement gives rise to a financial relationship between the radiologist or radiology group and the other physician or group. As such, the arrangement between the physician(s) and the radiologist(s) for DHS must meet an applicable exception, or further referrals by the physician(s) to the radiologist(s) will violate the Stark law. With respect to reading agreements, there are generally two potential ways to structure the arrangement: the radiologist can be engaged as a direct employee of the nonradiology group, or the radiologist can be engaged (directly or through the group practice) as an independent contractor. In either type of arrangement, the underlying reading agreement must comply with an applicable exception, the category of which is dictated by the type of financial relationship.9 Direct Employee
If the reading agreement is structured so that the nonradiology group employs the radiologist as a
direct employee, the applicable Stark law exception would be the employment exception [6,7]. Under the “bona fide employment relationship” exception, the employment relationship between an employer and a physician is exempt from the Stark prohibition of referrals if the following conditions are met: ● ●
●
the employment is for identifiable services; the amount of the remuneration under the employment is (1) consistent with fair market value, and (2) does not take into consideration the volume or value of referrals by the referring physician; and the agreement is commercially reasonable even if no referrals were made [7].
Often, however, physician groups prefer to contract with an outside radiologist or radiology group to provide the services, rather than employing the radiologist(s) directly.10 In such cases, the arrangement would need to comply with the Stark law’s exception for independent contractors. Independent Contractor
If the nonradiology group does not hire the radiologist as an employee but rather as an independent contractor, the applicable Stark law exception would be the “personal services arrangements” exception [8,9]. This exception applies regardless of whether the arrangement deals with the radiologist individually or the radiologist’s group. Compliance with the “personal services exception” requires that the following conditions be met:
8
They may also provide supervision of the TC of the services. 9 There are three categories of exceptions: (1) exceptions to ownership arrangements; (2) exceptions to compensation arrangements; and (3) exceptions to both ownership and compensation arrangements.
10
Direct employment may not be feasible because of recent regulations that the nonradiology groups must meet to offer DHS in their practices. This will be discussed in greater detail in a subsequent article.
●
●
●
● ●
the arrangement must be set out in writing and describe the specific services to be provided; the arrangement must cover all of the services to be furnished between the radiologist or radiology group and the entity; the aggregate services contracted for must be reasonable and necessary; the term of the arrangement must be at least one year; and the compensation paid over each term must be set in advance and not exceed fair market value or take into consideration the volume or value of referrals [10].11
Regardless of whether the radiologist is considered a direct employee or an independent contractor (assuming the applicable Stark law exception is met), there are additional Stark law exceptions the referring physician or physician group must satisfy to provide and bill for a service that the physician or group ordered. These issues will be addressed in a subsequent article. OTHER CONSIDERATIONS: ANTIMARKUP RESTRICTIONS ON DIAGNOSTIC IMAGING SERVICES
In addition to ensuring that the reading agreement complies with the Stark law, there are Medicare 11
Although a thorough analysis of the federal antikickback statute (AKS) is outside the scope of this article, we note that radiology reading arrangements must also be in compliance with AKS safe harbors as well. The AKS has two parallel safe harbors to the Stark law’s employee and independent contractor exceptions. If your arrangement is in compliance with either of these Stark exceptions, it will also generally be found to comply with the AKS safe harbors, with one notable exception. If the agreement is structured as an independent contractor arrangement, the AKS safe harbor regulations require that the aggregate amount of compensation be set in advance. This difference effectively prohibits any per-click or per-read arrangement and certain other arrangements that would otherwise meet the Stark exception [10].
928 Legal Counsel
billing restrictions that must also be considered, such as Medicare’s antimarkup prohibition on the TC and PC of diagnostic tests billed by the ordering physician or physician group or supplier (the “antimarkup rule”) [11].12 This is particularly important because the Stark law’s definition of “entity” exempts physician practices that bill Medicare for the TC or PC of a diagnostic test in compliance with the antimarkup rule [1]. Brief Overview of the Antimarkup Rule
The antimarkup rule applies to all diagnostic tests (even those that are not DHS for Stark law purposes) that are ordered and billed by the same physician or physician group or supplier. In such cases, the ordering physician or group or supplier must be deemed to “share a practice” with the physician supervising or performing the TC or PC of the diagnostic test. A physician is deemed to “share a practice” with the ordering or billing physician or physician group or supplier in either of two situations: 12
The antimarkup rule applies to all diagnostic tests, even those that are not DHS for Stark law purposes.
●
●
the supervising or performing physician provides services 75% or more of his or her time on behalf of the ordering or billing group; or the supervising or performing physician provides the service at the same location where the ordering physician provides substantially the full range of his or her services [12].
If neither of these two situations is in place, the antimarkup rule limits what the ordering and billing physician or physician group or supplier may bill Medicare to the lesser of; (1) the supervising or performing physician’s net charge to the billing physician or group or supplier; (2) the billing physician or group or supplier’s actual charge; or (3) the Medicare Physician Fee Schedule amount) [11]. CONCLUSIONS
The purpose of this article is to provide an overview of how the Stark law applies to reading arrangements; we will discuss how the Stark law affects other types of relationships in subsequent articles. Although there are a number of arrangements between radiologists and referring physicians that may
be permissible, it is important to have every aspect of such arrangements reviewed to ensure that the entire arrangement is in compliance with the Stark law (as well as other applicable federal and state laws). While a preliminary review of a “routine” arrangement may seem unnecessary, it is far more cost effective to properly structure an arrangement at the front end rather than to try to untangle, explain, or, even worse, defend a potentially improper arrangement. Think of it as preventive care.
REFERENCES 1. 42 CFR § 411.351. 2. 42 USC § 1395nn. 3. 42 CFR § 411.350 et seq. 4. 42 CFR § 411.354. 5. 42 USC § 1395nn(g). 6. 42 USC § 1395nn(e)(2). 7. 42 CFR § 411.357(c). 8. 42 USC § 1395nn(e)(3). 9. 42 CFR § 411.357(d). 10. 42 CFR § 1001.952. 11. 42 CFR § 414.50. 12. 42 CFR §§ 414.50(a)(2)(ii)-(iii).
Hayden Wool, Esq, Jacqueline Finnegan, Esq, and Wendy Chow, Esq, are from Garfunkel, Wild, PC, Great Neck, New York. Jacqueline Finnegan, Esq, Garfunkel, Wild, PC, 111 Great Neck Road, Great Neck, NY 11021; e-mail: [email protected].