How should providers prepare to audit themselves for compliance with one of the most complex health care laws in effect today? Carefully and deliberately, according to Sarah E. Coyne, Esq., National Chair of the Health Law Group at Quarles & Brady LLP, and Leah M. McNeely, Esq., Associate. The two attorneys discussed preparation for internal Stark Law (42 U.S.C. 1395nn) audits in a Health Care Compliance Association (HCCA) webinar titled, "The Stark Law: A Proactive Practical Approach to Internal Audit." In addition to providing attendees with an overview of the law, including its prohibitions, exceptions, and recent updates, they offered providers examples of common issues and audit suggestions.
The Stark Law, or physician self-referral law, strictly prohibits physicians from making referrals for designated health services (DHS) payable by Medicare to an entity with which the physician or an immediate family member has a financial relationship. The law, sponsored by former Congressional Representative Pete Stark (D-Calif), was originally intended to prevent physicians from referring patients to self-owned imaging companies. However, Coyne said that the reach of the law has become so comprehensive that even Stark has deemed it draconian.
Stark analysis. Determining whether a violation has occurred requires a four-part analysis so detailed that Coyne suggested, until an attorney becomes truly comfortable with the law, that he or she refuse to answer a client’s question regarding a potential violation over the phone, and instead write out an analysis and later provide the client with a response. To assess for a potential violation, an attorney or entity must determine the following:
- Is there a financial relationship between the referring physician and the DHS entity? The reach of this provision is so broad that the answer is almost always yes.
- Did the physician make a referral for DHS? This answer is also almost always yes, unless doctor referred the patient for services he or she performed himself or herself.
- Is the referral for DHS? There are 11 categories of DHS, but everything billed by a hospital will be deemed DHS.
- Is the DHS payable by Medicare?
If the answer to all of these questions is yes, the financial relationship is a Stark Law violation, unless one of 30 exceptions applies. Commonly invoked exceptions include those relating to fair market value (FMV), incidental benefits, electronic health record (EHR) donations, and a bona fide employment agreement. Coyne cautioned, however, that the mere existence of an employment agreement does not protect a provider from a Stark violation and referenced the landmark U.S. ex rel. Drakeford v. Tuomey Healthcare System, Inc. case as an example (see Tuomey saga punctuated with DOJ settlement, October 19, 2015). In addition, states may have "mini-Stark Laws" that require further analysis.
Recent updates. Recent changes to the Stark Law "softened" some existing requirements in response to overdisclosure. Previously, most exceptions required a signed, written agreement. New changes allow contemporaneous documents evidencing the course of conduct in lieu of a formal contract. Lack of signature on contemporaneous writing documenting the arrangement is forgiven for 90 days. Previously, contracts documenting certain exceptions needed to include language implementing a one-year minimum term, but a collection of documents evidencing the arrangement lasted at least one year is now sufficient. Changes also permit indefinite holdovers and provide that split bill arrangements do not implicate Stark. New exceptions were created for payments to physicians to assist them in compensating non-physician practitioners, and for timeshare arrangements, allowing physicians and hospitals to share space, equipment and services on a non-exclusive "as-needed" basis.
Audit preparation. Providers conducting internal audits need to hold pre-audit meetings to provide all relevant parties with a robust Stark Law education. They should designate responsibility for the audits to a particular individual to ensure the audit actions do not fall through the cracks. Coyne also recommended providers hire attorneys to oversee the complex process. She recommended a four-year lookback period, noting that providers may balk and ask to focus on a single year, but that they will eventually need to go further back. It is also important to determine where documentation related to physician arrangements is kept, as it is likely scattered throughout various departments. Participants in the meeting should also develop a checklist for the audit, addressing how to prioritize contracts, arrangements, and invoices for review, and determining what items to look for throughout the audit.
Violations. If a violation is discovered, it should be addressed as quickly as possible, since the parties will be considered to be within a period of disallowance until the arrangement is brought into compliance, any excess compensation is repaid by physician, and the hospital repays Medicare or discloses under the self-referral disclosure protocol (SRDP). Established by section 6409 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), the SRDP allows providers to disclose actual or potential Stark violations to CMS, potentially resulting in reduced penalties, avoidance of exclusion, and protection from qui tam whistleblower suits. It stops the clock requiring repayment of Medicare and Medicaid overpayments within 60 days of discovery, as established by ACA section 6402(a). In addition, providers will need to address a host of issues, including patient copayments and Anti-Kickback Statute (42 U.S.C. §1320a-7b) and IRS implications.
Attorneys: Sarah E. Coyne and Leah M. McNeely (Quarles & Brady LLP).
Companies: Health Care Compliance Association
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