HEALTH CARE COMPLIANCE 1 QUESTIONS (HEALTH INFORMATION MANAGEMENT) 1. What is the difference between the Stark Law and the AKS? Compare how the two deal wi

HEALTH CARE COMPLIANCE 1 QUESTIONS (HEALTH INFORMATION MANAGEMENT) 1. What is the difference between the Stark Law and the AKS? Compare how the two deal with these issues: the referral sources covered, the types of services (or goods) referred, who can be held liable, criminal vs. civil violations, necessary intent to violate the law, types of exceptions, and penalties for violations.

2. If the administrator of a five-physician medical practice asked you for the steps she should take to reduce the risks of an anti-kickback violation, what recommendations would you give her?

Number your response and reference your source.


Fraud and Abuse: Stark/Physician Self-Referral and Anti-Kickback

Learning Objectives
Physician Self-Referral (Stark) Law and Anti-Kickback Statute (AKS)
Services, individuals, organizations, and transactions affected by these laws.
Specific behaviors prohibited.
Exceptions and “safe harbors” for avoiding liability.
Anticipating and preventing violations.

Physician Self-Referral Law (Stark)
Initial law (Stark I) sponsored by Congressman Pete Stark enacted in 1989 and applied only to clinical laboratory services.
Omnibus Budget Reconciliation Act of 1993 (Stark II) expanded law to additional 10 types of clinical services.
Patient Protection and Affordable Care Act of 2010 added restrictions on physician-owned hospitals and required the issuance of a self-referral disclosure protocol.

Stark Prohibition
“… If a physician (or an immediate family member of such physician) has a financial relationship with an entity …, then the physician may not make a referral to the entity for the furnishing of designated health services for which payment otherwise may be made” under Medicare (also applicable to Medicaid). (underlining added).

The person making the referral may be a(n)
Optometrist, or

“Immediate family member”
Besides the referring physician herself, this person may be a
parent, child, or sibling (by birth or adoption);
stepparent, stepchild, step-brother, or step-sister;
father-in-law, mother-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law;
grandparent or grandchild; or
spouse of a grandparent or grandchild.

The entity with which there is a financial relationship must be one that bills CMS for designated health services (DHS) or that furnishes all or most of the components of the DHS.
This includes the person or entity that actually performs the DHS, or presents a claim for DHS services to the Medicare program.


“Financial relationship”
Direct or indirect ownership of an entity:
Equity stock, interest in a limited liability company, holding debt in an entity.
Direct or indirect compensation from an entity:
Physician’s compensation from an entity, lease between physicians and health care facilities, medical director agreements, and independent contract with physicians.

“Designated health services” (I)
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.

“Designated health services” (II)
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.

Penalties for Stark Violations
Payment for services in response to prohibited referral must be returned.
Civil Monetary Penalty of up to $15,000 for each non-compliant service.
Providers in the transaction may be excluded from participation in Medicare and Medicaid.
Civil assessment of up to 3x the amount reimbursed.
Possible simultaneous False Claim Act liability.

Exceptions to Stark Prohibitions
The Stark law includes 35 exceptions to its prohibitions, with some common requirements.
Arrangement in writing, signed by the parties, and specifying the space or services covered.
Compensation set in advance and at FMV.
Compensation not related to referral volume.
Arrangement commercially reasonable.
Must serve legitimate business purpose.

Exceptions to Stark Law Prohibitions – Common Examples
Ownership in publicly traded securities and mutual funds
In-office ancillary services
Rental of office space or equipment
Personal service arrangements
Bona fide employment relationship
Certain arrangements with hospitals
Physician recruitment

Reducing Risks of Stark Violations
Watch for non-monetary compensation.
Establish effective internal controls.
Legal/financial reviews of physician contracts.
Centralized physician contract approval.
Formal A/P check before physicians paid.
Services, compensation, and space allocations involving physicians are monitored.

Anti-Kickback Statute (AKS)
Originally enacted as a criminal law in 1972 to protect patients and federal health care programs from fraud and abuse.
In 1987, civil penalties and “safe harbors” were added.

Problems With Kickbacks
They encourage referrals based on monetary reward to the referral source rather than the medical need of the patient.
They lead to the overutilization of resources.
This subjects patients to unnecessary procedures that may pose clinical risks of their own.
Public and private payors bear the cost of the unnecessary services.

Anti-Kickback Statute Prohibitions
The AKS prohibits anyone from offering a kickback, paying a kickback, or receiving a kickback in return for the delivery of health care services.

2006 – Lincare Settles Probes for $12 Million Clearwater, Fla. – Respiratory giant Lincare Holdings has agreed to pay more than $12 million to settle ongoing kickback and reimbursement allegations

2013 – Dialysis giant DaVita HealthCare Partners Inc. has set aside $300 million to settle criminal and civil anti-kickback investigations, a sign the company could soon pay a price after years of fighting allegations about its relationships with doctors.
Read more: Denver-based DaVita sets aside $300 million to settle kickback probes – The Denver Post

2013 – Federal authorities have arrested Edward Novak, owner and CEO of Sacred Heart Hospital in Chicago, along with the hospital’s CFO and four physicians, for allegedly participating in a kickback scheme, according to a Chicago Tribune report.   

“Agents from the Federal Bureau of Investigation raided the 119-bed hospital this morning as part of a criminal probe, according to the report. The alleged scheme involves physicians receiving more than $225,000 in cash and other forms of payment for referring Medicare and Medicaid patients to Sacred Heart, according to the report.

Sacred Heart Executive Vice President and CFO Roy Payawal was also arrested this morning. Mr. Novak and Mr. Payawal allegedly attempted to conceal bribes made to physicians by masking them as fake rental payments and ghost contracts, according to the report.

Federal authorities have seized roughly $2 million in Medicare reimbursement payments the hospital allegedly received as a result of the alleged scheme. The money was in various bank accounts, according to the report. All six defendants were scheduled to appear for hearings today at the Dirksen U.S. Courthouse in Chicago.”


“Knowingly and willfully”
Acts with a bad purpose, with knowledge that the conduct violates some law.
Actual knowledge of an AKS violation or specific intent to violate the AKS is not necessary for a conviction.
Payment for referrals need be only one purpose of a business arrangement; other legitimate purposes do not avoid violation.

Payment to the physician may take any form, including a kickback, bribe, or rebate.
Payment may be in cash or in kind; anything of value may create a violation.

“Federal health care program”
The AKS is violated only if the kickback is intended to encourage a referral for services or products that will be reimbursed through a Federal health care program.
This includes Medicare, Medicaid, TRICARE (active military), Veterans Administration (military veterans), Indian Health Service, Public Health Service, and state Children’s Health Insurance Programs (CHIP).

Penalties for Violation of AKS
Civil monetary penalties of up to $50,000 per violation.
Civil assessments of up to 3x the amount of the kickback.
Provider exclusion from federal health care programs.
Potential False Claims Act liability.
Criminal penalties of up to $25,000 per violation and maximum five-year prison term.

Exceptions to AKS Prohibitions
Properly disclosed discounts or price reductions.
Payments to bona fide employees.
Certain payments to group purchasing organizations.
Waivers of Medicare coinsurance for certain individuals.
Certain risk-sharing arrangements with managed care organizations.

AKS “Safe Harbors”
If a payment arrangement fits within a safe harbor, it is free from AKS liability. If it does not, it does not automatically violate the AKS. It will be examined more closely.
Common characteristic of safe harbors is commercially reasonable services being exchanged for fair market value (FMV) prices.
Total compensation set in advance and documented in a one-year written agreement signed by the parties.

Safe Harbor Examples
Investment Interests
Space or Equipment Rental
Sale of Practice
Referral Services
Group Purchasing Organizations
Waiver of coinsurance and deductible.

Reducing Risk of AKS Violations (I)
Eliminate risk by placing the arrangement or transaction within a safe harbor.
Look for these risk factors: over-utilization of resources, increased program costs, adverse effects on care quality, reduced freedom of patient choice, compromised medical decision-making, and unfair competition.

Reducing Risk of AKS Violations (II)
Systematically record and track all contracts.
Rigorous documentation of FMV of payments.
Need for arrangement is justified and well documented.
Be able to show that services being reimbursed were actually provided.
Implement all 7 components of a mandatory compliance program.

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