By: Eric Hines
In this era of rising concern over healthcare costs and the provision of insurance to all Americans, physicians are also seeking to expand the services they provide to their patients. These “new” services often include physical therapy, laboratory services, imaging and durable medical equipment sales for their patients. Making a practice full service is not only more efficient for patients, but it also insures a continuum of care. Of course, it is also a potential revenue source for doctors and other healthcare providers. However, it is not a risk-free endeavor for the physician.
Physical therapy is a good example. Often physicians will assume ownership in physical therapy centers to make life easier for their patients and to increase their own revenue. There is nothing at all wrong with this so long as providers do not run afoul of Sections 1128(a)(7) and 1128(b)7 of the Social Security Act as related to the commission of acts described in 1128B(b) of the Federal anti-kickback statute and 42 U.S.C.S. 1395nn of the Social Security Act (“Stark”). The anti-kickback statute makes it an offense to knowingly and willfully offer, pay, solicit or receive any remuneration to induce or reward referrals of items or services reimbursable by a Federal health care program. “Stark” prohibits a physician from referring Medicare beneficiaries to a designated health service (“DHS”) entity for the provision of designated health services if the physician has a financial relationship with that DHS entity.
Many physicians are of the opinion that simply not treating Medicare or Medicaid patients at their particular facility is an easy fix to their potential anti-kickback or Stark problems. This is simply incorrect. The threshold determination is whether the arrangement runs afoul of Sections 1128(a)(7) and 1128(b)7 of the Social Security Act. This statute has been broadly interpreted by the government over the years to cover any arrangement where one purpose was to obtain money for the referral of services or to induce further referrals. In light of that, the federal government has repeatedly taken the position that simply excluding or “carving” out federal patients from business arrangements does not equate to compliance with the law. This same position was reasserted by the government in a recent OIG Advisory Opinion. OIG Advisory Opinion No. 13-03. This opinion arose out of a proposed arrangement wherein an independent clinical laboratory was to contract (through a management company) with physician groups to set up their own clinical laboratories. Each physician group was to have handled data collection, quality review and billing for its own laboratory services. The rationale behind this interpretation is that the “carve out” could lead to over-utilization of the non-related entity because of favorable pricing, convenience or a sense of obligation to the third-party provider. Such over-utilization could potentially lead to increased costs to the Federal healthcare programs. As such, it cannot be said that there is not a link between the third-party and the non-Medicare referrals. Interestingly, this type of “carve out” arrangement is allowed under Stark, but it can be complex to design a compliant medical practice.
In short, many physicians and their practice groups have taken up the practice of treating only non-Medicare patients in their therapy practice while referring the Medicare patients elsewhere. They may even be referring them to other healthcare providers exclusively under a management agreement whereby the original provider is reimbursed pursuant to the management agreement. These arrangements, while not per se violations of the law, are certainly areas that are not free of risk of government sanction. These complex relationships need good legal counsel when first being set up or the parties risk being sanctioned by the government under the anti-kickback statute and Stark.