Repayment of Stark violations can be tricky

October 23, 2009

Exceptions that permit referrals under Stark are complex, therefore determining a violation has happened and the preferred way of managing are also difficult.

Key Points

Submitting a claim as a result of a violating transaction is more difficult because it triggers overpayments, as well as civil-money penalties of $15,000 for each violation. For a circumvention scheme-"you refer to mine and I'll refer to yours"-the penalty is $100,000. There have been settlements that find that these violations entail false claims as well, which is why whistleblower Stark cases are brewing around the country.

Violations can include those internal to the group, such as improper compensation formulas, non-compliant, in-office ancillary services, not meeting the definition of a group, as well as those that involve other parties, such as agreements with hospitals for more than fair market value, landlord-tenant relationships for more space than is necessary, or ownership in a joint venture to which Medicare patients are referred and for which claims are submitted. A hospital in Iowa recently paid $4.5 million in settlement of allegations that it violated Stark by paying five physicians vastly in excess of the fair-market value for their salaries as full-time employees.

The Stark regulations offer the opportunity to fix non-compliant transactions within a certain specified timeframe. But these non-compliance periods are often helpful only for mere technical problems. They can be used when an agreement has been drafted and only one side signed, but somehow the other party did not execute it fully. There is a compliance window of six months for a lease which has expired, but a new one has not yet been signed. The ability to fix a Stark problem is complicated by the recent announcement by the Office of Inspector General that it will no longer allow Stark violations to be reported in the voluntary disclosure program available for false claims and anti-kickback violations. Often, the resolution of the problem will entail repaying monies to the Medicare Administrative Contractor (i.e., the carrier) as a voluntary repayment to effectively expunge the bad claims that resulted from the tainted referral.

But repayment to the government or carrier is not always necessary. Sometimes, the right response is to reconcile dollars that should have passed between a hospital or other designated health-service provider and the physician group in a one-time, isolated transaction. This is a separate 'exception' under the Stark regulations, for which there is little detail in the rules. But the enforcers have repeatedly said that you need only fit in one exception to be compliant. Sometimes, this approach is best.

Fixing a Stark violation requires sophisticated legal guidance and is never a "do-it-yourself" proposition. If the physician says the wrong things to the wrong agency, further investigations of completely unrelated matters could be started, not to mention the risk of civil money penalties. Learning what the Stark law covers, however, is something that physicians should take on themselves.

The author is the principal in Alice G. Gosfield and Associates in Philadelphia ( http://www.gosfield.com) and a Medical Economics Consultant. She can be reached at agosfield@gosfield.com
. Malpractice Consult deals with questions on common professional liability issues. Unfortunately, we cannot offer specific legal advice. If you have a general question or a topic you'd like to see covered here, please send it to memalp@advanstar.com
.