The Physician Self-Referral ("Stark")
Regulation
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Related Resources
Stark Regulation
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The Stark law was passed in 1993 and became effective January 1,
1995, although final regulations were not published until many years
later. The law prohibits a physician (or an immediate family member)
who has a financial relationship with an entity from making a referral
to that entity for furnishing a designated health service (DHS)
for which Medicare or Medicaid would otherwise pay. The DHS's covered
by the law are: (1) clinical laboratory; (2) physical therapy (including
speech-language pathology services); (3) occupational therapy; (4)
radiology, including magnetic resonance imaging, computerized axial
tomography scans and ultrasound; (5) radiation therapy services
and supplies; (6) durable medical equipment and supplies; (7) parenteral
and enteral nutrients, equipment, and supplies; (8) prosthetics,
orthotics, and prosthetic devices and supplies; (9) home health
services; (10) outpatient prescription drugs; and (11) inpatient
and outpatient hospital services. Congress provided for a number
of exceptions to this prohibition and gave CMS the authority to
create additional exceptions.
On March 19, 2004, CMS issued a One-Time Notification implementing
the 18 month moratorium on physician investment in specialty hospitals
as required by the Medicare Modernization Act. On April 6, 2004,
corrections to the March 26 regulation were published in the Federal
Register.
The regulation is very lengthy and complex and should be reviewed
by each organization's legal counsel in light of specific business
arrangements and referral patterns related to a particular hospital,
faculty practice plan, individual physician, or other health care
entity.
One of the important changes CMS made from the proposed rule to
the final rule was the addition of an academic medical center exception.
On March 26, 2004, CMS published an interim final rule that made
a number of significant changes in the AMC exception.
The academic medical center exception has several basic requirements.
The referring physician must: (1) be a bona fide employee
of the academic medical center on a full-time or substantial part-time
basis; (2) be licensed to practice medicine in the state(s) in which
he or she practices; (3) have a bona fide faculty appointment;
and (4) provide either substantial academic services or substantial
clinical teaching services for which the faculty member receives
compensation as part of his or her employment relationship with
the academic medical center. The exception also has requirements
relating to the physician's compensation: it must be set in advance,
not exceed fair market value, and not be determined in a manner
that takes into account the volume or value of any referrals or
other business generated by the referring physician within the academic
medical center.
In addition, the academic medical center must meet all of the following
requirements: (1) all transfers of money must directly or indirectly
support the missions of teaching, indigent care, research or community
service; (2) the relationship of the components of the academic
medical center must be set out in written agreements or other written
documents that have been adopted by the governing body of each component;
(3) all money paid to a referring physician for research must be
used solely to support bona fide research or teaching and
must be consistent with the terms and conditions of the grant.
Notable Revisions and Clarifications
- Meaning of "set in advance"
As is true of several other exceptions, the academic medical center
exception requires that a physician's compensation be "set in advance."
CMS has modified the interpretation of "set in advance" to permit
some percentage compensation. The "set in advance" criteria are
met if (1) the formula for calculating percentage compensation
is established with specificity prospectively; (2) is objectively
verifiable; and (3) may not be changed over the course of the agreement
between the parties based on the volume or value of referrals or
other business generated by the referring physician. Compensation
also is "set in advance" if it is set in an agreement before the
services for which payment is being made are rendered. The compensation
also must be set at "fair market value"(discussed below). These
clarifications are important and should allow for flexible compensation
arrangements that meet the Stark requirements.
- Definition of "academic medical center"
CMS has broadened the definition of an academic medical center
so that hospitals or health systems that sponsor 4 or more approved
medical education programs (termed "an accredited academic hospital")
will qualify for the exception if they meet the other criteria
of the exception. The hospital or health system that meets this
criteria may be the same hospital that is an "affiliated hospital."
The "affiliated hospital" is one in which a majority of the physician
on the medical staff are faculty members and a majority of all hospital
admissions are made by physicians who are faculty members. In addition,
the referring physician may be on the faculty of the affiliated
medical school or the accredited academic hospital. ·
- Requirements related to structure of faculty practice plan
CMS has eliminated the criteria that a faculty practice plan be
a tax exempt 501(c)(3) or 501(c)(4) organization. Instead, there
must be sufficient assurance that the faculty practice plan is part
of a bona fide academic medical center and that the practice
plan supports the core teaching mission. An academic medical center
may have more than one affiliated faculty practice plans and the
plan(s) can be affiliated with the teaching hospital, medical school,
or "accredited academic hospital."
- Requirements related to hospital's medical staff and admissions
by faculty
The exception requires that a majority of the affiliated hospital's
medical staff be faculty members and that a majority of the hospital's
admissions be made by faculty members. The Agency has clarified
several points. First, a teaching hospital can include any faculty,
including courtesy and volunteer faculty, in determining whether
it qualifies under these tests. Second, residents and non-physician
professionals do not need to be included as medical staff. CMS also
states that: (i) the majority of physicians on the medical staff
must be on the faculty, and (ii) the aggregation of faculty from
any affiliated medical school is permitted.
- Bona fide employees of a component of the academic medical
center
The exception itself is only available for referrals by physicians
who are bona fide employees of a component of the academic
medical center. This is to ensure that the relationship between
the physician and the party paying the remuneration is sufficiently
different from the usual arrangements of entities and organizations
that are not academic medical centers. For the same reason, primary
care physicians who do not perform substantial academic services
(defined below) or clinical teaching services cannot qualify for
this exception, though other exceptions may be available to them.
CMS states that "a referring physician could be an employee of the
teaching hospital and a volunteer faculty member, as long as his
or her employment encompasses substantial academic services of clinical
teaching services."
- Substantial academic services or clinical teaching
The requirement that the referring physician provide substantial
academic or clinical teaching services means that the physician
spends at least 20 percent of his or her professional time, or alternatively,
8 hours per week, providing academic services or clinical teaching
(or a combination of both). CMS notes that this is not an absolute
requirement, but a "safe harbor," so that physicians who do not
meet this standard may still be providing substantial academic or
clinical teaching services, depending on circumstances. The Agency
advises that academic medical centers should use a "reasonable and
consistent method" to calculate a physician's academic and clinical
teaching services. CMS also clarifies that the substantial services
test can be met through either academic services (which include,
without limitation, both classroom and academic research services)
or clinical teaching services, or a combination of both.
- Determining a teaching physician's fair market value
When determining whether a teaching physician's compensation is
at fair market value, the comparison can be to either other academic
medical centers or comparable private practice physicians in the
academic medical center's area if that is the higher amount.
- Written agreement or appropriately documented course of conduct
The previous regulation required that the agreement among the components
of the academic medical center be set out in a written agreement.
CMS acknowledges that it was not their intent to require a single
written document. The relationships must be memorialized in writing
or there must be a clearly established course of conduct that is
appropriately documented. If the academic medical center is a single
entity, financial reports that document transfers of funds between
components would suffice.
- Money paid to referring physician for research must be for bona
fide research or teaching
Payments to physicians through grants that may be used for teaching
are acceptable. However, payments to referring to physicians for
indigent care or community service will not fit within this exception,
though they may be able to fit within another exception.
It is important to remember that if the AMC criteria can not be
met, the regulations contain other exceptions that may be helpful.
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