Stark Law includes provisions for the practice of physician self-referral of patients to a healthcare organization he or she has financial ties with. Violating Stark Law could cost hospitals significant amounts of money, regardless of intent. Penalties could include a $15,000 per service civil monetary penalty and a $100,000 civil monetary penalty for each financial arrangement deemed a violation of the law. Here Bob Wade, an attorney at law firm Baker & Daniels who specializes in healthcare law, provides some insight that can help hospitals improve compliance with Stark Law.
Q: What is a common misunderstanding about Stark Law?
Mr. Bob Wade: A common misunderstanding is that you have to intentionally violate the statute, and that's not true. So, if you have a referring physician that has a financial relationship with a hospital, that financial relationship has to meet one of 30 Stark exceptions.
Q: What is an exception hospitals should be particularly aware of in order to steer clear of a Stark Law violation?
BW: The employment exception is an exception to watch for. Under this exception, a hospital employing a physician must pay fair market value for identifiable services. The employment exception does not require a written agreement; however, a written agreement has to be arranged for independent contractors. Here's a typical scenario for independent contractor arrangements: a hospital decides to contract a three-year medical directorship with a physician. The physician's compensation is fair market value, but no one was monitoring the hard expiration date of that contract. So once it expires, the hospital finds it has to pay back to the government all the money given to the physician when he or she wasn't under a contract. In addition, under Stark Law once a contract expires the hospital technically cannot bill for services provided by that physician, so money paid for those services must always be returned to the government.
So let's say the independently contracted physician was a cardiologist and was being compensated $10,000 a year for serving as a medical director. Three years after the contract's expiration, the hospital not only pays back $30,000 for the compensation it paid to the physician over that three-year period but must also pay back a hypothetical $7 million in referred cardiology services by the physician. The only deficiency was that there was no contract.
Q: What do you suggest hospitals do to better monitor contracts?
BW: It's not mandated to have a contract management database or some other formal process to manage financial arrangements, but it's hard to manage contracts without one. When you're talking about a larger hospital that's managing 5,000 financial arrangements, monitoring compliance with Stark Law can become problematic.
Learn more about Baker & Daniels.
Q: What is a common misunderstanding about Stark Law?
Mr. Bob Wade: A common misunderstanding is that you have to intentionally violate the statute, and that's not true. So, if you have a referring physician that has a financial relationship with a hospital, that financial relationship has to meet one of 30 Stark exceptions.
Q: What is an exception hospitals should be particularly aware of in order to steer clear of a Stark Law violation?
BW: The employment exception is an exception to watch for. Under this exception, a hospital employing a physician must pay fair market value for identifiable services. The employment exception does not require a written agreement; however, a written agreement has to be arranged for independent contractors. Here's a typical scenario for independent contractor arrangements: a hospital decides to contract a three-year medical directorship with a physician. The physician's compensation is fair market value, but no one was monitoring the hard expiration date of that contract. So once it expires, the hospital finds it has to pay back to the government all the money given to the physician when he or she wasn't under a contract. In addition, under Stark Law once a contract expires the hospital technically cannot bill for services provided by that physician, so money paid for those services must always be returned to the government.
So let's say the independently contracted physician was a cardiologist and was being compensated $10,000 a year for serving as a medical director. Three years after the contract's expiration, the hospital not only pays back $30,000 for the compensation it paid to the physician over that three-year period but must also pay back a hypothetical $7 million in referred cardiology services by the physician. The only deficiency was that there was no contract.
Q: What do you suggest hospitals do to better monitor contracts?
BW: It's not mandated to have a contract management database or some other formal process to manage financial arrangements, but it's hard to manage contracts without one. When you're talking about a larger hospital that's managing 5,000 financial arrangements, monitoring compliance with Stark Law can become problematic.
Learn more about Baker & Daniels.