T he mere mention of Stark Law can send shivers down many a physician’s spine. This law is among the most feared laws that govern medical practice. Its stiff fines and complex nature make it often hard to discern what action is within the boundaries and what action might constitute a violation. Here, I’ll shed some light on this fearsome law. Stark differs from the False Claims Act (FCA) and the Anti-Kickback Statute (AKS), which I discussed in two previous “Legal Ease” columns (May 2005 and March 2005), in important ways (see Table 2). The penalties for violating Stark are purely monetary (up to $15,000 for each violation). In addition, there is strict liability for Stark violations. If you engage in a practice that Stark II prohibits, then you are guilty even if you did not intend to violate Stark’s Strictures. No payment may be made for a Stark prohibited service. And if such a service results in payment, then the provider must return such payment to the government. While Stark itself contains no criminal penalties, the U.S. Department of Justice has brought cases under the federal False Claims Act predicated on violations of the Stark Law. Also, in a handful of cases, the U.S. Department of Justice has joined qui tam actions to Stark cases. In this article, I’ll provide an overview of Stark Law and define some of its more high-profile components to give you some insight into avoiding a violation. Reviewing the Details The Stark Law (the “Ethics in Patient Referrals Act” or EPRA) was conceived of in 1989 and then revised as Stark I, which became effective Jan. 1, 1992. Later, Stark II (known as Phase I) became effective Jan. 1, 1995, and the newest regulations came into play on Jul. 26, 2004. The Stark Law, a Medicare payment rule named for Rep. Fortney “Pete” Stark, was designed to prevent self-referrals. In essence, this law prohibits a physician from making a referral to an entity (including the physician’s own practice) for the furnishing of certain designated health services covered by Medicare if the physician (or an immediate family member) has a financial relationship with the entity. In addition, the law prohibits an entity from submitting a claim or bill to any person for a service or item furnished pursuant to a prohibited referral. Under the law, 11 types of designated health services (DHS) exist, which are highlighted in Table 1. It should be noted that some dermatology services are subject to exceptions to the Stark Law, which I will discuss below. The new Stark II regulations make the Stark Law somewhat more rational and easier to comply with than Stark I. However, Stark II is still complex and harsh in its penalties. With the new regulations in place, doctors should expect increased enforcement and heightened scrutiny. Therefore, a discussion of the rules is in order. What Constitutes a Referral? The definition by Stark of “referral” is expansive. Under Stark, when doctors request or order certain tests or services, or when they certify the medical necessity for these tests or services, a referral is deemed to occur. Requests made by nurse practitioners, physician assistants or others that you “direct” or “control” are also regulated. “Incident-to” services, which are services that are performed by ancillary employees or other group practice doctors under the supervision of a qualified Medicare provider — also constitute a referral. This is also true of services ordered by a consultant, with exceptions under certain conditions for referrals made by pathologists, diagnostic radiologists and radiation oncologists. While the Stark regulations forbid self-referral for outpatient services, there is an exception to the Stark regulation if a patient is seen by another doctor in the same group practice. In brief (the regulations are complex and will be discussed in some detail below), to be considered one group at least 75% of the total patient care services of the group’s members must be furnished through the group, billed under a billing number assigned to the group, with amounts received treated as receipts of the group. Therefore, if one dermatologist sees a patient and bills for a 99203 (level three initial visit) and the patient is referred for patch testing with another dermatologist in the group who is specialist in patch testing, and this dermatologist bills for a 99243 (level 3 consultation), then Stark should not come into play. Importantly, CMS has excluded from the definition of a referral any DHS personally performed or provided by the referring physician. When Do Independent Contractors Qualify as Members of the Group Practice? Changes in the regulations have further defined the role of independent contractors and group practices. The regulations state that an independent contractor physician can qualify in certain circumstances as being in the group practice even though, for purposes of determining whether the group meets the definition of a group, the independent contractor does not qualify as a “member” of the group. This allows a part-time, independent contractor physician to accept referrals within the group. Defining a Group Practice Under Stark To qualify as a group practice, all of the following must apply to the group practice: • The group must consist of two or more physicians legally organized as a partnership, professional corporation, foundation, not-for-profit corporation, faculty practice plan, or similar association. • Each physician member must substantially provide the full range of his or her normal services through the joint use of shared office space, facilities, equipment and personnel. • Substantially all of the services of physician members are provided through the group and are billed under the group’s name and billing number. • Group overhead expenses and income are distributed in accordance with predetermined methods. • No physician member of the group receives compensation that is directly or indirectly based on the volume or value of referrals by the physician. (The law goes on to explain, however, that physicians in group practices are entitled to profit and productivity bonuses based on: a share of the overall profits of the group, services personally performed by the physician, or services performed incidental to the physician’s services. The bonus may not be directly related to the volume or value of referrals by such physicians.) • Group members personally conduct no less than 75% of the physician/ patient encounters of the group practice. However, for each physician, the group practice had 12 months to reach the 75% billing level as long as the group is meeting the standard when the new physician is excluded from the calculation and as long as the new physician’s employment in the practice is documented in writing (this last provision is new). • The group must meet any other standards established by the Secretary of the Department of Health and Human Services. Clinical Laboratory Services and Stark Stark applies to clinical laboratory services, which are CPT codes in 80000s. The key laboratory codes used in the surgical pathology section for gross and microscopic evaluations of skin are 88302, 88304 and 88305. If the professional and technical components of the biopsy are separated, then they are split billed as 88305-26 and 88305-TC, respectively. Dermatologists can bill for 80000 codes for services that: 1. they perform themselves because, as I have said, Stark does not apply to work a doctor does personally 2. are related to work done in their practice group because Stark allows for referral within a practice group. However, if a dermatologist hires a pathologist who spends less than 75% of his or her time in the dermatologist’s practice group to evaluate specimens, Stark would apply and such services could not legally be billed to Medicare. Billing for the technical component of a biopsy has important legal considerations. I will also mention that under Medicare regulations if a dermatologist pays a certain amount, for example, $10 for processing of a biopsy specimen, then he or she may not bill Medicare any more than the amount paid for processing — for example, $10 for the technical component of the biopsy fee. Also, if the technical services are not provided by the dermatologist personally (or under their direct supervision) or by their practice group directly, it is possible that such billing could be scrutinized under Stark for falling in its 80000 code self referral prohibition and might be challenged as a forbidden referral. Defining a Financial Relationship Under Stark To properly define a financial relationship under Stark, you must first utilize three tests. 1. The first test assesses if you have an ownership interest — either directly or indirectly — in the designated health service providing organization (DHSO) that provides the service. 2. The second test assesses if you have an investment interest in the DHSO. 3. A third test assesses if you are receiving compensation either directly or indirectly by the DHSO. Indirect relationships provided the most problematic areas in Stark because Stark collapses relations to assess if one party has received gain through referrals. What Stark Means for Dermatology To conclude, Stark is a complex law with many ramifications for practice. Group practices can function under the regimen imposed by Stark and dermatologists can continue to read their own biopsies or those of their groups. To fully understand this law and its implications for your practice, the best thing to do is to contact an attorney and discuss any particular fact situation.
Understanding Stark Law
T he mere mention of Stark Law can send shivers down many a physician’s spine. This law is among the most feared laws that govern medical practice. Its stiff fines and complex nature make it often hard to discern what action is within the boundaries and what action might constitute a violation. Here, I’ll shed some light on this fearsome law. Stark differs from the False Claims Act (FCA) and the Anti-Kickback Statute (AKS), which I discussed in two previous “Legal Ease” columns (May 2005 and March 2005), in important ways (see Table 2). The penalties for violating Stark are purely monetary (up to $15,000 for each violation). In addition, there is strict liability for Stark violations. If you engage in a practice that Stark II prohibits, then you are guilty even if you did not intend to violate Stark’s Strictures. No payment may be made for a Stark prohibited service. And if such a service results in payment, then the provider must return such payment to the government. While Stark itself contains no criminal penalties, the U.S. Department of Justice has brought cases under the federal False Claims Act predicated on violations of the Stark Law. Also, in a handful of cases, the U.S. Department of Justice has joined qui tam actions to Stark cases. In this article, I’ll provide an overview of Stark Law and define some of its more high-profile components to give you some insight into avoiding a violation. Reviewing the Details The Stark Law (the “Ethics in Patient Referrals Act” or EPRA) was conceived of in 1989 and then revised as Stark I, which became effective Jan. 1, 1992. Later, Stark II (known as Phase I) became effective Jan. 1, 1995, and the newest regulations came into play on Jul. 26, 2004. The Stark Law, a Medicare payment rule named for Rep. Fortney “Pete” Stark, was designed to prevent self-referrals. In essence, this law prohibits a physician from making a referral to an entity (including the physician’s own practice) for the furnishing of certain designated health services covered by Medicare if the physician (or an immediate family member) has a financial relationship with the entity. In addition, the law prohibits an entity from submitting a claim or bill to any person for a service or item furnished pursuant to a prohibited referral. Under the law, 11 types of designated health services (DHS) exist, which are highlighted in Table 1. It should be noted that some dermatology services are subject to exceptions to the Stark Law, which I will discuss below. The new Stark II regulations make the Stark Law somewhat more rational and easier to comply with than Stark I. However, Stark II is still complex and harsh in its penalties. With the new regulations in place, doctors should expect increased enforcement and heightened scrutiny. Therefore, a discussion of the rules is in order. What Constitutes a Referral? The definition by Stark of “referral” is expansive. Under Stark, when doctors request or order certain tests or services, or when they certify the medical necessity for these tests or services, a referral is deemed to occur. Requests made by nurse practitioners, physician assistants or others that you “direct” or “control” are also regulated. “Incident-to” services, which are services that are performed by ancillary employees or other group practice doctors under the supervision of a qualified Medicare provider — also constitute a referral. This is also true of services ordered by a consultant, with exceptions under certain conditions for referrals made by pathologists, diagnostic radiologists and radiation oncologists. While the Stark regulations forbid self-referral for outpatient services, there is an exception to the Stark regulation if a patient is seen by another doctor in the same group practice. In brief (the regulations are complex and will be discussed in some detail below), to be considered one group at least 75% of the total patient care services of the group’s members must be furnished through the group, billed under a billing number assigned to the group, with amounts received treated as receipts of the group. Therefore, if one dermatologist sees a patient and bills for a 99203 (level three initial visit) and the patient is referred for patch testing with another dermatologist in the group who is specialist in patch testing, and this dermatologist bills for a 99243 (level 3 consultation), then Stark should not come into play. Importantly, CMS has excluded from the definition of a referral any DHS personally performed or provided by the referring physician. When Do Independent Contractors Qualify as Members of the Group Practice? Changes in the regulations have further defined the role of independent contractors and group practices. The regulations state that an independent contractor physician can qualify in certain circumstances as being in the group practice even though, for purposes of determining whether the group meets the definition of a group, the independent contractor does not qualify as a “member” of the group. This allows a part-time, independent contractor physician to accept referrals within the group. Defining a Group Practice Under Stark To qualify as a group practice, all of the following must apply to the group practice: • The group must consist of two or more physicians legally organized as a partnership, professional corporation, foundation, not-for-profit corporation, faculty practice plan, or similar association. • Each physician member must substantially provide the full range of his or her normal services through the joint use of shared office space, facilities, equipment and personnel. • Substantially all of the services of physician members are provided through the group and are billed under the group’s name and billing number. • Group overhead expenses and income are distributed in accordance with predetermined methods. • No physician member of the group receives compensation that is directly or indirectly based on the volume or value of referrals by the physician. (The law goes on to explain, however, that physicians in group practices are entitled to profit and productivity bonuses based on: a share of the overall profits of the group, services personally performed by the physician, or services performed incidental to the physician’s services. The bonus may not be directly related to the volume or value of referrals by such physicians.) • Group members personally conduct no less than 75% of the physician/ patient encounters of the group practice. However, for each physician, the group practice had 12 months to reach the 75% billing level as long as the group is meeting the standard when the new physician is excluded from the calculation and as long as the new physician’s employment in the practice is documented in writing (this last provision is new). • The group must meet any other standards established by the Secretary of the Department of Health and Human Services. Clinical Laboratory Services and Stark Stark applies to clinical laboratory services, which are CPT codes in 80000s. The key laboratory codes used in the surgical pathology section for gross and microscopic evaluations of skin are 88302, 88304 and 88305. If the professional and technical components of the biopsy are separated, then they are split billed as 88305-26 and 88305-TC, respectively. Dermatologists can bill for 80000 codes for services that: 1. they perform themselves because, as I have said, Stark does not apply to work a doctor does personally 2. are related to work done in their practice group because Stark allows for referral within a practice group. However, if a dermatologist hires a pathologist who spends less than 75% of his or her time in the dermatologist’s practice group to evaluate specimens, Stark would apply and such services could not legally be billed to Medicare. Billing for the technical component of a biopsy has important legal considerations. I will also mention that under Medicare regulations if a dermatologist pays a certain amount, for example, $10 for processing of a biopsy specimen, then he or she may not bill Medicare any more than the amount paid for processing — for example, $10 for the technical component of the biopsy fee. Also, if the technical services are not provided by the dermatologist personally (or under their direct supervision) or by their practice group directly, it is possible that such billing could be scrutinized under Stark for falling in its 80000 code self referral prohibition and might be challenged as a forbidden referral. Defining a Financial Relationship Under Stark To properly define a financial relationship under Stark, you must first utilize three tests. 1. The first test assesses if you have an ownership interest — either directly or indirectly — in the designated health service providing organization (DHSO) that provides the service. 2. The second test assesses if you have an investment interest in the DHSO. 3. A third test assesses if you are receiving compensation either directly or indirectly by the DHSO. Indirect relationships provided the most problematic areas in Stark because Stark collapses relations to assess if one party has received gain through referrals. What Stark Means for Dermatology To conclude, Stark is a complex law with many ramifications for practice. Group practices can function under the regimen imposed by Stark and dermatologists can continue to read their own biopsies or those of their groups. To fully understand this law and its implications for your practice, the best thing to do is to contact an attorney and discuss any particular fact situation.
T he mere mention of Stark Law can send shivers down many a physician’s spine. This law is among the most feared laws that govern medical practice. Its stiff fines and complex nature make it often hard to discern what action is within the boundaries and what action might constitute a violation. Here, I’ll shed some light on this fearsome law. Stark differs from the False Claims Act (FCA) and the Anti-Kickback Statute (AKS), which I discussed in two previous “Legal Ease” columns (May 2005 and March 2005), in important ways (see Table 2). The penalties for violating Stark are purely monetary (up to $15,000 for each violation). In addition, there is strict liability for Stark violations. If you engage in a practice that Stark II prohibits, then you are guilty even if you did not intend to violate Stark’s Strictures. No payment may be made for a Stark prohibited service. And if such a service results in payment, then the provider must return such payment to the government. While Stark itself contains no criminal penalties, the U.S. Department of Justice has brought cases under the federal False Claims Act predicated on violations of the Stark Law. Also, in a handful of cases, the U.S. Department of Justice has joined qui tam actions to Stark cases. In this article, I’ll provide an overview of Stark Law and define some of its more high-profile components to give you some insight into avoiding a violation. Reviewing the Details The Stark Law (the “Ethics in Patient Referrals Act” or EPRA) was conceived of in 1989 and then revised as Stark I, which became effective Jan. 1, 1992. Later, Stark II (known as Phase I) became effective Jan. 1, 1995, and the newest regulations came into play on Jul. 26, 2004. The Stark Law, a Medicare payment rule named for Rep. Fortney “Pete” Stark, was designed to prevent self-referrals. In essence, this law prohibits a physician from making a referral to an entity (including the physician’s own practice) for the furnishing of certain designated health services covered by Medicare if the physician (or an immediate family member) has a financial relationship with the entity. In addition, the law prohibits an entity from submitting a claim or bill to any person for a service or item furnished pursuant to a prohibited referral. Under the law, 11 types of designated health services (DHS) exist, which are highlighted in Table 1. It should be noted that some dermatology services are subject to exceptions to the Stark Law, which I will discuss below. The new Stark II regulations make the Stark Law somewhat more rational and easier to comply with than Stark I. However, Stark II is still complex and harsh in its penalties. With the new regulations in place, doctors should expect increased enforcement and heightened scrutiny. Therefore, a discussion of the rules is in order. What Constitutes a Referral? The definition by Stark of “referral” is expansive. Under Stark, when doctors request or order certain tests or services, or when they certify the medical necessity for these tests or services, a referral is deemed to occur. Requests made by nurse practitioners, physician assistants or others that you “direct” or “control” are also regulated. “Incident-to” services, which are services that are performed by ancillary employees or other group practice doctors under the supervision of a qualified Medicare provider — also constitute a referral. This is also true of services ordered by a consultant, with exceptions under certain conditions for referrals made by pathologists, diagnostic radiologists and radiation oncologists. While the Stark regulations forbid self-referral for outpatient services, there is an exception to the Stark regulation if a patient is seen by another doctor in the same group practice. In brief (the regulations are complex and will be discussed in some detail below), to be considered one group at least 75% of the total patient care services of the group’s members must be furnished through the group, billed under a billing number assigned to the group, with amounts received treated as receipts of the group. Therefore, if one dermatologist sees a patient and bills for a 99203 (level three initial visit) and the patient is referred for patch testing with another dermatologist in the group who is specialist in patch testing, and this dermatologist bills for a 99243 (level 3 consultation), then Stark should not come into play. Importantly, CMS has excluded from the definition of a referral any DHS personally performed or provided by the referring physician. When Do Independent Contractors Qualify as Members of the Group Practice? Changes in the regulations have further defined the role of independent contractors and group practices. The regulations state that an independent contractor physician can qualify in certain circumstances as being in the group practice even though, for purposes of determining whether the group meets the definition of a group, the independent contractor does not qualify as a “member” of the group. This allows a part-time, independent contractor physician to accept referrals within the group. Defining a Group Practice Under Stark To qualify as a group practice, all of the following must apply to the group practice: • The group must consist of two or more physicians legally organized as a partnership, professional corporation, foundation, not-for-profit corporation, faculty practice plan, or similar association. • Each physician member must substantially provide the full range of his or her normal services through the joint use of shared office space, facilities, equipment and personnel. • Substantially all of the services of physician members are provided through the group and are billed under the group’s name and billing number. • Group overhead expenses and income are distributed in accordance with predetermined methods. • No physician member of the group receives compensation that is directly or indirectly based on the volume or value of referrals by the physician. (The law goes on to explain, however, that physicians in group practices are entitled to profit and productivity bonuses based on: a share of the overall profits of the group, services personally performed by the physician, or services performed incidental to the physician’s services. The bonus may not be directly related to the volume or value of referrals by such physicians.) • Group members personally conduct no less than 75% of the physician/ patient encounters of the group practice. However, for each physician, the group practice had 12 months to reach the 75% billing level as long as the group is meeting the standard when the new physician is excluded from the calculation and as long as the new physician’s employment in the practice is documented in writing (this last provision is new). • The group must meet any other standards established by the Secretary of the Department of Health and Human Services. Clinical Laboratory Services and Stark Stark applies to clinical laboratory services, which are CPT codes in 80000s. The key laboratory codes used in the surgical pathology section for gross and microscopic evaluations of skin are 88302, 88304 and 88305. If the professional and technical components of the biopsy are separated, then they are split billed as 88305-26 and 88305-TC, respectively. Dermatologists can bill for 80000 codes for services that: 1. they perform themselves because, as I have said, Stark does not apply to work a doctor does personally 2. are related to work done in their practice group because Stark allows for referral within a practice group. However, if a dermatologist hires a pathologist who spends less than 75% of his or her time in the dermatologist’s practice group to evaluate specimens, Stark would apply and such services could not legally be billed to Medicare. Billing for the technical component of a biopsy has important legal considerations. I will also mention that under Medicare regulations if a dermatologist pays a certain amount, for example, $10 for processing of a biopsy specimen, then he or she may not bill Medicare any more than the amount paid for processing — for example, $10 for the technical component of the biopsy fee. Also, if the technical services are not provided by the dermatologist personally (or under their direct supervision) or by their practice group directly, it is possible that such billing could be scrutinized under Stark for falling in its 80000 code self referral prohibition and might be challenged as a forbidden referral. Defining a Financial Relationship Under Stark To properly define a financial relationship under Stark, you must first utilize three tests. 1. The first test assesses if you have an ownership interest — either directly or indirectly — in the designated health service providing organization (DHSO) that provides the service. 2. The second test assesses if you have an investment interest in the DHSO. 3. A third test assesses if you are receiving compensation either directly or indirectly by the DHSO. Indirect relationships provided the most problematic areas in Stark because Stark collapses relations to assess if one party has received gain through referrals. What Stark Means for Dermatology To conclude, Stark is a complex law with many ramifications for practice. Group practices can function under the regimen imposed by Stark and dermatologists can continue to read their own biopsies or those of their groups. To fully understand this law and its implications for your practice, the best thing to do is to contact an attorney and discuss any particular fact situation.
