Steven Baruch - Health Care Compliance Association

COMPLIANCE
101
Stark and academic
medical centers: A
primer
By Kenneth DeVille, PhD, JD, CIP, CHC,
CHRC; and Joan A. Kavuru, JD, RN
Editor’s note: Kenneth DeVille is a Professor in
the Department of Bioethics and Interdisciplinary
Studies at Brody School of Medicine at East Carolina
University in Greenville, North Carolina. He
serves as the university’s Ethics Liaison to the North
Carolina State Ethics Commission and is an adjunct
member of the Department of Public Health.
He has served as the Chief Compliance Officer for
the School of Medicine, as the university HIPAA
Privacy Officer, and as the Administrative Director
of the university and medical center Institutional
Review Board. He may be contacted by e-mail at
devillek@ecu.edu.
Joan A. Kavuru practices health care regulatory
law and most recently held the position of
Health Care Regulatory Specialist at The Brody
School of Medicine at East Carolina University.
Previously, she founded and served as the
Director of the Office of Compliance as well as
the HIPAA Privacy Officer at East Carolina
University. She recently relocated to the Philadelphia
area and may be contacted by e-mail at
jkavuru@gmail.com.
The Stark federal self-referral statute 1
is well known to experienced compliance
officers and health law attorneys.
Under Stark’s basic tenet, physicians
cannot refer patients for a “designated health
service” (DHS), payable by Medicare, to a
health care “entity” with which the physician
or an immediate family member has a financial
relationship. The referral prohibition is
absolute in the absence of meeting one of a
limited list of specific, and sometimes technical,
statutory exceptions.
Practicing within an academic setting or
faculty practice plan (FPP) does not immunize
practitioners and institutions from the Stark
proscriptions. Indeed, in 2008, Memorial
Health University Medical Center, a teaching
hospital headquartered in Savannah, Ga., agreed
to pay $5.08 million to settle Stark allegations. 2
But, an early revision of Stark created a special
exception for academic medical centers (AMCs)
to account for their unique practice arrangement
(hereinafter “AMC exception”). 3
Teaching hospitals, medical schools, physicianfaculty,
and FPPs are typically linked in an
intricate, ongoing, symbiotic relationship
involving a myriad of leases, service contracts,
research support agreements, shared projects,
and financial transfers. Teaching hospitals
sometimes subsidize the teaching, research,
and service missions of the AMC by providing
grants, subsidies, or other transfers to the
associated medical school. Or, the teaching
hospital may employ faculty physicians to
serve as medical directors or in other administrative
roles. These activities and others that
involve financial relationships between entities
providing DHSs and referring physicians
raise potential Stark concerns and require
the satisfaction of a specific Stark exception.
However, if the elements of the AMC exception
are met, all such financial arrangements
may be permissible under this exception.
Unfortunately, some AMCs and FPPs will not
meet the AMC exception, thereby requiring an
analysis of other Stark exceptions.
This commentary describes the elements of the
Stark AMC exception and outlines the analysis
that practitioners and entities within an AMC
Health Care Compliance Association • 888-580-8373 • www.hcca-info.org
will have to pursue when that exception is not
satisfied. Stark remains a complex, highly-technical
statute, and institutions should always rely
on qualified legal counsel to analyze individual
fact patterns. This discussion provides only a
broad introduction to the standard issues and
nomenclature so that compliance officers can
spot issues, develop appropriate policies, create
relevant data bases, and highlight potential
concerns for leadership and their own legal
counsel to address in more detail.
Basic framework of Stark
Stark I, a provision of the Social Security Act,
became effective on January 1, 1992. Narrowly
drawn, it prohibited physicians and other
identified providers from referring Medicare
patients for laboratory services in which the
referring physicians or their immediate families
held a “financial interest” in the lab. So-called
Stark II expanded the law and prohibits
referrals for DHSs to any “entity” in which
the referring physician, dentist, oral surgeon,
podiatrist, ophthalmologist, or chiropractor
has a financial relationship, either through
investments or through compensation.
For purposes of Stark, “compensation” is
construed broadly and includes any remuneration,
payment, discount, or in-kind
benefit paid to the referring physician by the
DHS provider. “Entity” includes the health
provider’s own practices, as well any other
public or private partnership, corporation,
or foundation that provides DHS in return
for CMS reimbursement. DHSs are specifically
delineated and include anything from
laboratory and radiological services, to durable
medical equipment, to home health services
and outpatient prescription drugs. 4 Fines for
Stark violations can reach $15,000 for each bill
submitted to Medicare on a prohibited DHS,
and both providers and entities can be subject
to exclusion from the Medicare and Medicaid
Continued on page 30
December 2010
29