Steven Baruch - Health Care Compliance Association

Stark and academic medical centers: A primer ...continued from page 29
December 2010
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programs. Stark Phase III is the most recent
articulation of the federal anti-referral statute. 5
The Stark Law identifies a number of specific
financial arrangements that may qualify as
“exceptions” to the basic anti-referral prohibition.
It is important to note that these exceptions
are based on very detailed requirements
that must be met precisely in order for the
referral relationship to be deemed legitimate
under Stark. This list of exceptions includes
the AMC exception. 6
Academic medical center exception
Four basic elements must be satisfied to meet
the AMC exception under Stark. First, in
order to constitute an AMC under the exception,
the entity must include:
n an accredited medical school;
n an FPP that is organized as a tax-exempt
organization or is the part of a tax-exempt
organization; and
n a hospital in which the majority of medical
staff are physician-faculty members and in
which a majority of admissions are made
by physician-faculty.
Second, the referring physician who works
within the qualified AMC must be a bona
fide employee of a component of the
academic health center, hold a bona fide
faculty appointment at the medical school,
and provide “substantial” academic or clinical
teaching services for which the faculty receives
compensation. The “substantial” requirement
is met if the physician devotes a minimum
of 20% or 8 hours of the work week to academic
activities, which may include research,
classroom, or clinical teaching responsibilities.
The referring faculty physician’s compensation
must be “set in advance,” not exceed
fair market value (FMV), and not take into
consideration the volume or value of referrals
to any of the components of the AMC.
Additional and specific regulatory guidance
exists on the “set in advance” and FMV
requirements under Stark.
Third, transfers of money not based on
services provided or leases from one entity
within the AMC to another entity or faculty
physician within the AMC must support
the missions of teaching, research, indigent
care, or community service. The relationship
between/among the entities within the AMC
must be articulated in writing and adopted by
the governing bodies of each of the relevant
entities in the AMC. Money paid to a
physician for research by an entity within the
AMC must be used solely to support research.
Fourth, the money transfers made from
one entity to another, or to a referring
faculty physician, may not violate the federal
Anti-kickback Statute. 7 Thus an independent
anti-kickback analysis must also be conducted
before an arrangement can be deemed to meet
the AMC exception. 8 There is very little litigation
or appellate precedent exploring the AMC
exception. But, a federal district court in U.S.
ex. rel. Villanfane v. Solinger et al. has taken a
“relatively flexible approach to interpreting the
various requirements of the AMC exception”
and suggested that the exception will not be
held to “hypertechnical” requirements. 9
Impact and limitations of the AMC exception
The AMC exception, when satisfied, allows
medical schools, FPPs, and affiliated hospitals
to work together to meet the common goal
of teaching, research, and clinical care for
the community without running afoul of
a complicated and frequently burdensome
Stark analysis that otherwise would have to be
resolved on a project-by-project, contributionby-contribution
basis. Quite simply, if the
AMC exception is met, Stark does not apply
to referrals made by AMC physicians to AMC
components. As importantly, satisfaction of
the AMC exception will allow the granting of
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funds for mission purposes from one entity (a
teaching hospital) to another (typically a medical
school). Although obvious, it is important
to emphasize that Stark requirements still
must be satisfied when faculty physicians
establish financial relationships with entities
outside of the AMC or when components of
the AMC establish financial relationships with
physicians outside the AMC.
Despite the exception’s relatively clear elements
and the suggestion from Solinger that
future courts may take a “flexible” approach
in its application, many AMCs will be unable
to take advantage of its benefits. In some
cases, the teaching hospital will not meet the
requirement that faculty physicians constitute
the threshold 50% of the hospital’s medical
staff. In other AMC arrangements, faculty
physicians will not account for 50% of the
hospital admissions census. This may prove true,
especially in teaching hospitals with open staff
arrangements. Or, faculty physician admissions
in a particular AMC setting might satisfy the
50% threshold for a teaching hospital in a given
year, but fluctuate up and down in subsequent
years. In such settings, if the financial arrangement
between two or more AMC components
(e.g., a teaching hospital, medical school, or
FPP) is based on a multi-year contract, the failure
to satisfy the 50% threshold during any year
of the term could constitute a Stark violation.
Much depends, as well, on the precise nature
of the legal and financial organization of the
FPP. The FPPs that most resemble traditional
private group practice arrangements with
profits distributed to the physician membership
will obviously be the least likely to meet the
exception; but plans that rely on salaried faculty
physicians will typically be permitted.
FPP arrangements that distribute bonuses to
physicians based on performance measures
should be scrutinized in order to ensure that
they do not violate the requirement that the