As you know, health care is a highly regulated area. As such, there are both federal and state laws and regulations that are regularly implicated during health care transactions. The ones at the federal level that arise with the greatest frequency are:

To help members avoid gaining firsthand experience with these laws, the ACC has developed some resources on related topics.

Physician Self-Referral (Stark) Law

The physician self-referral law, also known as the Stark law, prevents physicians from referring patients for certain services to be performed at entities in which he or she (or an immediate family member) has a direct or indirect financial interest. As evident from the name of the statute, the Stark law applies only to physicians, rather than all health care practitioners, and the financial interest may be in the form of ownership, compensation or investment.

The history of the Stark law dates back to the late 1980s. The original Stark law, referred to as Stark I, applied only to clinical laboratory tests. It was not until the passage of Stark II that other services, including imaging and durable medical equipment. These services are referred to as designated health services (DHS) and are limited to the following categories:

  • Clinical laboratory services
  • Physical therapy services
  • Occupational therapy services
  • Outpatient speech-language pathology services
  • Radiology and certain other imaging services
  • Radiation therapy services and supplies
  • Durable medical equipment and supplies
  • Parenteral and enteral nutrients, equipment and supplies
  • Prosthetics, orthotics and prosthetic devices and supplies
  • Home health services
  • Outpatient prescription drugs
  • Inpatient and outpatient hospital services

Cardiology practices are most frequently affected by the prohibition against the referrals for radiology and certain other imaging services. However, the Stark law has a lengthy list of exceptions to it that allow for referrals to be made in certain circumstances. This allows for referrals to other physicians within the same group practice and for imaging services performed by groups where the arrangements are structured in a particular way. This exception is typically referred to as the “in-office ancillary services” exception. Access more information on the various exceptions.

The codes for certain specific categories of DHS are updated on an annual basis and can be found in the last appendix each year of the Medicare physician fee schedule.

The Stark regulations have been updated a number of times. The most recent overhaul was in September 2007 when Stark II, Phase III was published. However, the Centers for Medicare and Medicaid Services will frequently use the Medicare physician fee schedule to make changes to the regulations, as well.

If you are contemplating an arrangement that implicates the Stark law or involves the provision of a DHS, the ACC strongly encourages you to consult an attorney with extensive experience working with the Stark law.

Anti-Kickback Statute

The anti-kickback statute (AKS) is often confused with the physician self-referral (Stark) law. However, there are some key differences. While the Stark law only applies to physicians, the AKS applies to anyone involved in the provision of healthcare services – from physician office staff through nonphysician practitioners to physicians.

Anyone who knowingly and willfully receives or pays remuneration to influence the referral of federal healthcare program business, including Medicare and Medicaid, is in violation of the AKS and has committed a felony. Violations are punishable by up to five years in prison, criminal fines up to $25,000, administrative civil money penalties up to $50,000 and exclusion from participation in federal healthcare programs.

Like the Stark law, the basic AKS is fairly broad. There is certain conduct that would generally fall within the bounds of the AKS but is either obviously not in violation of the spirit of the law or has a clearly beneficial purpose, and to accommodate this conduct, the Office of the Inspector General (OIG) has issued more than 20 “safe harbors.” Information on these safe harbors is available on the OIG website. Arrangements that meet all of the requirements are generally considered legal and safe from prosecution.

Individuals or organizations contemplating an arrangement that may technically be in violation of the law and does not fit one of the safe harbors but feel that it is not in violation of the spirit of the law may consider contacting the OIG for an Advisory Opinion in advance of implementing the arrangement. Before doing so, the ACC urges you to consult with an attorney who has extensive experience in working with the AKS and the OIG.

False Claims Act

The federal False Claims Act (FCA), located at 31 U.S.C. §§3729-3733, provides that individuals or entities that knowingly submit or cause another individual or entity to submit false claims for payment of government funds may be required to repay the government three times the amount of its damages plus civil penalties of $5,500 to $11,000 per violation.

In the event that an individual other than a government employee uncovers evidence of violations of the FCA, that individual can bring suit as a qui tam relator or whistleblower. In the event of a victory in court, a qui tam relator may be able to collect a portion of the judgment, the percentage of which depends upon whether the government opts to join the lawsuit.

Rarely are allegations of the FCA brought alone. Instead, frequently, the FCA is used merely as a tool to increase the threat and amount of damages.

Civil Monetary Penalties Law

The civil monetary penalties law (CMPL), located at 42 U.S.C. § 1320a-7a, authorizes the Secretary of Health and Human Services (HHS) to seek CMPs and fines for various types of conduct. The Office of the Inspector General (OIG) for HHS  generally carries out these responsibilities on behalf of the Secretary. The OIG has the authority to also seek to exclude individuals and entities from participation in all federal health care programs.

The types of conduct that fall under the CMPL include:

  • Filing or causing someone to file false claims
  • Committing or causing someone to commit violations of the anti-kickback statute
  • Violating or causing someone to violate the physician self-referral (Stark) law
  • Failing to provide emergency care when requested (in the case of a hospital operating an emergency room)
  • Others

The particular fines associated with each vary, but may include up to three times the amount of the original assessment for each violation. Individuals or organizations charged with violations of the anti-kickback statute, Stark law or others may also be charged with violating the CMPL.

Anti-Markup Regulation

By law, Medicare imposes limitations on what a physician can bill a patient in situations where the physician purchases a diagnostic test from another physician. Until recently, this was referred to as the “purchased diagnostic test” rule. The Centers for Medicare and Medicaid Services made changes to the rule as part of the 2008 Medicare physician fee schedule that were implemented in 2009, including changing the name to the “anti-markup” rule.

The anti-markup rule applies when a diagnostic service payable through the Medicare physician fee schedule is performed by one physician and is billed by another physician and those physicians do not “share a practice.”

If the two individuals do not share a practice, payment to the billing physician, for either the technical component (TC) or the professional component (PC), is limited to the lowest of the following amounts:

  • The performing physician’s “net charge” to the billing physician
  • The billing physician’s actual charge
  • The fee schedule amount for the test that would be allowed if the performing physician billed directly

The net charge does not include the cost of equipment or space leased to the performing physician by the billing physician or other entity.

Tests for Determining Application of the Anti-Markup Rule

Since the anti-markup rule does not apply if the performing and billing physicians “share a practice,” there are two tests that can be applied to determine if the physicians share a practice:

  • Substantially all services test
  • Site of service test

Substantially All Services Test

Under the substantially all services test, if the performing physician (the physician who supervises the TC or performs the PC or both) furnishes substantially all of his or her professional services through the billing physician, none of the performing physician’s diagnostic testing services will be subject to the anti-markup rule. “Substantially all” in this instance translates to at least 75 percent.

If the performing physician does not meet the substantially all services test, an analysis should be performed using the site of service test.

Site of Service Test

Under the site of service test, TCs conducted and supervised and PCs performed in “the office of the billing physician or other supplier” by a physician owner, employee or independent contractor of the billing physician avoid the anti-markup rule.

The term “office of the billing physician or other supplier” is defined as any medical office space, regardless of the number of locations, in which the ordering physician regularly furnishes patient care. This includes the space where the billing physician furnishes diagnostic testing if the space is located in the “same building,” as defined in the Stark regulations (42 CFR § 411.351) in which the ordering physician regularly furnishes patient care.

In the event that the billing physician or other supplier is a physician organization, as defined in the Stark regulation referenced above, the “office of the billing physician or other supplier” is the space in which the ordering physician provides substantially the full range of patient care services that the ordering physician generally supplies

With respect to the TC, the performing supplier is the physician that supervised the TC, whereas the performing physician for the PC is the physician that performed the PC.

Billing Requirements

When claims are submitted electronically, more than one test subject to the anti-markup rule may be billed on the electronic format. Where practices continue to submit paper claims, each component of the test must be submitted on separate claims forms. Global billing should not be used; instead modifier 26 or the TC modifier should be used as appropriate with the appropriate amount allocated to each service.

For more information on proper billing for services subject to the anti-markup rule, visit the Medicare Internet-Only Manuals, Claims Processing Manual (Pub. 100-04), Chap. 1 – General Billing Requirements.