Four Stark Law Tips Worth Noting

The Stark (physician self-referral) and antikickback laws are nothing if not complicated.

That’s why we asked the health care attorney who “wrote the book” on these topics to help us highlight a few areas that may be of interest to many physicians. Austin attorney Mark Chouteau is the author of TMA’s new publication, Navigating the Referral Minefield: Stark and Antikickback Rules. Here are three caveats and one heads-up about Stark and antikickback law that may have relevance in your career.

  1. Consolidation of physician practices into hospital groups. More and more, hospitals are buying physician practices; the physician then goes to work as an employee of a physician nonprofit group affiliated with — and subsidized by —the hospital. “A number of issues arise,” Mr. Chouteau said. For one, Medicare does not like any intangible value in such a sale or purchase. “The Centers for Medicare & Medicaid Services (CMS) takes the position that that would amount to paying to get the patients, which is clearly not allowed. So applying value to goodwill or the value of a noncompete agreement is tricky, at best,” he said. The actual assets of the practice have very little value, and for legal reasons, the practice cannot be valued as a going concern without running afoul of the Stark and antikickback statutes.  

    In addition, with the sale of the practice, the physician will lose to the hospital the revenue stream from the practice’s ancillary services. The hospital cannot consider the value of those ancillaries when determining the physician’s compensation, which must be commercially reasonable and for fair market value. To determine fair market value, valuators rely on several annual physician salary surveys, Mr. Chouteau said, noting that CMS has cautioned that any physicians paid in excess of the 75th percentile within those surveys may come under regulatory scrutiny. Any compensation paid to a physician that is more than the revenue he or she generates is not commercially reasonable. 
  2. Contracts for administrative duties. Any contracts for administrative duties physicians enter into with a hospital must be for fair market value, which hourly is substantially less than fair market value for the physician’s time practicing medicine. If the parties enter into such an agreement, e.g., a medical director agreement, they will need to prove that the physician actually performed services under that agreement. “We recommend that each medical director keep detailed timesheets for the administrative duties performed under such an agreement,” Mr. Chouteau said. “We recommend that hospitals withhold payment until such a time record is submitted.” 
  3. Income guarantee agreements. Hospitals may enter into income guarantee agreements with new physicians or physicians moving into a community, and under certain conditions may forgive the money spent as a part of that income guarantee, conditioned on the physician continuing to practice in the community beyond the income guarantee timeframe. Likewise, Mr. Chouteau said, in underserved markets, a hospital can pay retention bonuses to physicians considering leaving that community, under certain circumstances.  
  4. False Claims Act. Because a violation of the Stark or antikickback law is automatically also a violation of the federal False Claims Act (FCA), the danger in violating those laws is greatly enhanced. In addition to the penalties or imprisonment under those laws, the FCA imposes treble damages, penalties up to $21,000 per violation, and exclusion from any federally funded health program. FCA cases can also be brought by whistleblowers (often current or former employees or competitors), who are entitled to 15 percent to 30 percent of the money the government recovers from such actions. “Plaintiff attorneys in Texas no longer make big money from malpractice lawsuits and are now actively seeking whistleblowers, many of whom have made millions of dollars for FCA cases they brought on behalf of the federal government,” Mr. Chouteau said. 

Navigating the Referral Minefield: Stark and Antikickback Rules, which describes in detail the safe harbors and exceptions that keep physician billing and financial relationships within the law, is available in the TMA Education Center. If you are considering an employment situation as described in tip No. 1, read also TMA’s. Employment Contracts for Physicians: The Comprehensive Guide, Second Edition, for everything you need to know before signing on the dotted line. It’s also available in the TMA Education Center. See also for more ways TMA helps you stay in compliance across the board.

Published July 28, 2016

TMA Practice E-Tips main page

Last Updated On

December 06, 2016

Originally Published On

July 28, 2016

Related Content

Health Law | Self-Referral | Stark