The Stark Law, officially named the Physician Self-Referral Law (42 U.S.C. § 1395nn), forbids physicians to refer a Medicare/Medicaid patient to a “designated health services” (DHS) provider that the referring physician (or his immediate family member) has a “financial relationship” with, unless an exception applies. Similarly, the Stark Law disallows DHS providers from billing Medicare or Medicaid for services provided to a beneficiary based on an illegal referral. Some Stark Law exceptions, known as the “general exceptions”, cover both ownership or investment interests and compensation arrangements. Other exceptions apply to either ownership/investment interests or compensation arrangements. This article outlines the Stark Law exceptions that only apply to a physician’s ownership or investment in a DHS entity.
In this context, “designated health services” include: (1) clinical laboratory services; (2) physical therapy services; (3) occupational therapy services; (4) outpatient speech-language pathology services; (5) radiology and certain other imaging services; (6) radiation therapy services and supplies; (7) durable medical equipment and supplies; (8) parenteral and enteral nutrients, equipment, and supplies; (9) prosthetics, orthotics, and prosthetic devices and supplies; (10) home health services; (11) outpatient prescription drugs; and (12) inpatient and outpatient hospital services.
As defined by the Stark Law, a “financial relationship” constitutes either an ownership or investment interest in a DHS entity or a compensation arrangement, including commercial contracts, with a DHS entity. Such financial relationships may be direct or indirect, so as to include financial relationships involving one or more intermediaries between the physician and the DHS entity.
Ownership or Investment Interest Exceptions to the Stark Law
Publicly Traded Investments
- Publicly Traded Securities: Physicians may own stock in DHS corporations or corporations that own DHS providers as long as the shares were available on the open market at the time of purchase, the shares are listed for trade in a regional exchange or other qualified quotation system, and the corporation has at least $75 million in shareholder equity.
- Mutual Funds: Physicians may freely own stock in mutual funds that have investment interests in publicly traded DHS corporations as long as the funds have at least $75 million in total assets.
The provider exceptions to the Stark Law accommodate the special needs of certain communities.
- Rural Providers: Rural providers are DHS entities that provide at least 75% of their DHS to residents of rural areas. Physicians may refer patients to a rural provider in which they have an ownership or investment interest without violating the Stark Law as long as the rural provider is not a specialty hospital.
- Puerto Rico: The Stark Law does not apply to ownership interests in hospitals located in Puerto Rico.
- Whole Hospital: This exception allows doctors to have an ownership interest in hospitals where they practice and still refer patients to that hospital, as long as the ownership interest is in the entire hospital and not a specific department of it.
Oberheiden & McMurrey, LLP assists physicians, medical service providers, and other healthcare professionals with questions on healthcare law, compliance, and criminal defense. Whether you just want to make sure that you do not run afoul of the highly complicated Stark Law regulations or whether your business is under Stark Law investigation, our team of former federal healthcare prosecutors and experienced defense attorneys routinely solves situations in which Stark Law understanding is required. Call us any time, including weekends, to see how we can use our knowledge and experience to help you with your case. All consultations are free and confidential.
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