Stark Regulations for Physicians New and Old

Stark regulations Stamp

CMS made several changes to the Stark regulations for physicians in 2016, including some useful clarifications.  Now there are some court decisions which further clarify the expectations of the Stark Regulations.  But of course, the more things change, the more they stay the same – at least in some respects.


Stark Regulations for physicians eased some absolute requirements

In simple terms, Stark Regulations implementing the law, prohibit financial relationships between physicians who are in a position to make patient referrals (and certain of their family members), and any one of 10 designated health services, unless the arrangement meets one of the exceptions.

The Stark Law is considered a “strict liability” statute, which means the intent of the parties in entering into the arrangement doesn’t matter.  What matters is that all of the requirements of the exception are met.  One of the issues that tripped up a great many physicians and hospitals was the requirement that a written, signed agreement be in place prior to the commencement of payments received by the physician.  This requirement was relaxed to provide that a “writing” could suffice.

The “writing” has to contain the terms of the arrangement, including identifiable services and rate of compensation.  The “writing” could even be a collection of documents, as long as there was evidence that the parties agreed to the arrangement.  Signatures on documents must be obtained within 90 days of the commencement of the arrangement.


Court decisions on Stark Regulations in 2017

There have been at least three court decisions on “writings” documenting agreements to date.

  • In a decision on physician arrangements at Hamot Medical Center, a court found the documentation claimed as satisfying the “writing” standard was inadequate.  It did not contain a description of the services to be provided, the term of the arrangement or the compensation.  Although the parties exchanged emails on prospective cardiology medical directorships, they did not include those details.  An unsigned draft Medical Director Agreement was also not persuasive.  In fact, the hospital was accused of entering into sham arrangements to induce referrals.
  • A second decision turned out very differently.  In this case, the Stark Regulations for physicians addressed the hospital’s medical directorship arrangements that had expired, and had not been renewed.  But the parties continued to perform under the terms of the expired agreements.  The physicians continued to provide services and submit invoices.  The hospital continued to make payment in accordance with the expired agreements.  This was ruled sufficient evidence for a jury to consider that a valid “writing” describing the arrangement existed.
  • A third decision involved an arrangement between a physician Professional Corporation (PC) and an urgent care company.  The Stark Regulations for physicians applied by the Court, questioned who signed the agreement, and if that person was empowered to sign on behalf of the PC.  There were several blanks in the agreement that should have contained information about the terms of the arrangement.  The Court ultimately found the agreement could not be relied upon as a “writing”.


Stark Regulations and the Acquisition of Physician Practices

It is still very possible to run afoul of Stark regulations when regulatory agencies are investigating.  For better or worse, regulatory agencies sometimes start from the premise that financial arrangements between physicians and Designated Health Services are, at bottom, about getting physician referrals.  So there can be intense scrutiny of arrangements that come to their attention.

Acquisition of Physician Practices can be plagued with conflict over physician contracts, practice prerogatives, and the scope of professional practice which require careful review of Stark regulations for physicians.  The Office of Inspector General (OIG) may become more aggressive when imposing civil monetary penalties on hospitals that run afoul of Stark regulations after the changes in 2016.

So all in all, there were a few additional ways to stay in compliance based on the changes to Stark regulations for physicians in 2017.

  • Hospitals can use “writings” to substantiate an arrangement.
  • There can be unlimited holdover periods of existing agreements (provided the compensation for services is still at fair market value!).
  • Recruitment  arrangements for non-physician providers are permitted.

Due diligence in compliance with Stark regulations for physicians is a must, and may also need to include a thorough review of related compliance with state and federal health care statutes, rules and regulations.

When you need proven expertise and performance

Jim Hook, MPH

Mr. James D. Hook has over 30 years of healthcare executive management and consulting experience in medical groups, hospitals, IPA’s, MSO’s, and other healthcare organizations.

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