A November 13th order from U.S. District Judge Gregory A. Presnell hit Halifax Hospital in Daytona Beach hard and has implications for all physician bonus compensation arrangements. The background of the whistleblower case involves:
Since its passage in 1989, the now ubiquitous federal law known as the Stark Law has driven the business behavior of health care providers of many kinds. Recent developments, however, make us wonder whether the end of Stark is near, and if so, whether that’s a good thing.
By way of background, the Stark law has two components: part one, a self referral prohibition, generally forbids physicians from referring to a provider of any “designated health service” (DHS) (e.g. MRI, PT, clinical lab) if the physician or his/her immediate family member has a financial relationship (including ownership interest) with the provider of the service. Part two mandates that certain compensation arrangements between healthcare providers meet certain requirements. Things like medical director agreements, management agreements, employment and independent contractor arrangements have been regulated by the law since its inception. Most notably, for purposes of this article, one provision (the “In Office Ancillary Services” exception or “IOAS”, also known as the “Group Practice Exception”) has allowed medical practices to provide all sorts of “ancillary services” to their own patients. That is the key aspect of the law that is lately coming under serious attack.
The Stark Regs (1) forbid doctors and their immediate family members from referring their patients to businesses they own which provide “designated health services,” and (2) contains a long list of permitted financial relationships between health care providers. The list of what constitutes a “designated health service” (DHS) includes PT, rehab, diagnostic imaging, clinical lab, DME, and home health. A “physician” means an M.D., D.O., chiropractor, podiatrist, optometrist or dentist. An “immediate family member” is a husband or wife; birth or adoptive parent, child, or sibling; stepparent, stepchild, stepbrother, or stepsister; father-in-law, mother-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law; grandparent or grandchild; and spouse of a grandparent or grandchild. In short, if you or your family member owns a DHS, don’t refer to it. Unless of course your situation falls within one or more of the gazillion exceptions.
A few key changes from the third set of revisions (so called Stark III) which affect physicians are helpful to keep in mind. For instance, the way fair market value of physician compensation is determined in the Stark II regs has been simplified and now depends on an amorphous consideration of the transaction, its location and other factors. The clear formulas contained in Stark II was dropped and this makes the need for an expert FMV study even more compelling.
In the age of heightened regulatory scrutiny, physicians and other health care providers often question whether “Consignment Closet” relationships are legal. If properly structured these arrangements are not only legal but are of great benefit to patients needing valuable medical devices. A properly structured relationship will, in all probability, withstand a regulatory challenge by the Office of Inspector General or from other regulatory authorities.
Health law is the federal, state, and local law, rules, regulations and other jurisprudence among providers, payers and vendors to the healthcare industry and its patient and delivery of health care services; all with an emphasis on operations, regulatory and transactional legal issues.