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Test your Stark II knowledge

HIM Connection, September 14, 2004

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Would your hospital's chief financial officer be applying Stark II regulations correctly when denying a physician's request to lease space, equipment, and services from a management services organization owned by the hospital?

You likely come across scenarios daily that raise questions regarding the application of Stark II regulations.

The answer to the above question is not a simple "yes" or "no." You must carefully analyze the situation and compare facts against Stark II regulations, says Bruce Johnson, JD, MPA, special counsel at Denver-based Faegre & Benson.

The applicable Stark II regulation prohibits physician referrals for designated health services (DHS) to entities with which the physician, or the physician's immediate family member, has a financial relationship-unless an exception applies.

For the arrangement to violate Stark II, all of the following elements must be present:

• Physician-specializing in general medicine, osteopathy, dental surgery, dental medicine, podiatric medicine, optometry, or chiropractic.
• Referral-defined as a "request" for any DHS for which payment may be made through the Medicare program. Ordering, certifying, and recertifying the need for DHS is also considered a referral. In addition, DHS ordered by a consulting physician is considered a referral by the physician requesting the consultation. In essence, a referral occurs whenever a physician requests a procedure, test, item, service, or supply that is classified as DHS, but does not necessarily provide the service.
• DHS-service payable to Medicare in whole or in part. Specific categories of services include clinical laboratory, radiology and other imaging, radiation therapy, durable medical equipment, home health, outpatient prescription drugs, and inpatient and outpatient hospital services.
• Entity-any organization that furnishes DHS and to which CMS makes a payment.
• Financial relationship-physician's (or his or her immediate family member's) ownership and investment interests, and compensation arrangements.

Lesson: There are four basic "triggers" that suggeset a Stark law violation may be present. If a (1) physician (2) makes a Medicare or Medicaid referral (3) for a DHS (4) to an entity with which the physician or an immediate family member has a financial relationship, that referral implicates the Stark law prohibition-unless an exception applies.

Stark includes exceptions for the following:

1. In-office ancillary services
2. Space leases
3. Equipment leases
4. Personal services
5. Bona fide employees
6. Rural areas
7. Physician payment for an item or service at fair market value
8. Relationships between hospitals and physicians unrelated to DHS
9. Ownership in a whole hospital
10. Certain pre-paid health plan relationships
11. Fair-market-value relationships
12. Medical staff benefits
13. Nonmonetary compensation of less than three hundred dollars

Note: Compliance with an exception is required to avoid a Stark law violation.

This excerpt is adapted from the book Compliance Troubleshooter: Tackling the Top 10 Compliance Challenges.

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