Steven Baruch - Health Care Compliance Association

Stark and academic medical centers: A primer ...continued from page 31
The “stand in the shoes” doctrine
The foregoing justification for many financial
arrangements in the AMC setting was
profoundly complicated by the 2007 Phase III
revisions of Stark and the introduction of the
so-called “stand in the shoes” doctrine. Simply
stated, the “stand in the shoes” doctrine declares
that a referring physician will be deemed to
have a “direct compensation arrangement” with
a DHS provider if the only intervening entity
between the physician and the DHS provider is
his or her “physician organization.” 14
As a practical matter, this revision could have
meant that a “physician organization” (whose
physician members referred patients to a
DHS provider within an AMC) could not
accept reimbursement or compensation of any
sort without meeting one of the stipulated
direct compensation exceptions—an onerous,
impractical, and sometimes impossible task in
an AMC setting. Mission support payments
from DHS providers to FPPs and medical
schools appeared especially vulnerable, because
there was no direct compensation exception
applicable to mission support payments made
for general teaching, research, community
service, and indigent care purposes. Other
financial arrangements between the FPP/
medical school, too, might be analyzed as
direct compensation relationships, because the
referring faculty physician might be deemed as
having the same direct compensation relationship
as the physician organization. 15
Final “stand in the shoes” regulations
After multiple delays, extensive commentary,
competing proposals, and deliberation, CMS
amended the “stand in the shoes” requirements
in the 2009 Final Hospital Inpatient Prospective
Payment System (IPPS) rules. 16 These
most recent revisions clarify the operation of
the “stand in the shoes” doctrine for AMC
entities that wish to analyze their internal
financial relationships with faculty physicians.
Simply stated, CMS declared that a physician
will be deemed to “stand in the shoes” of
his or her physician organization only if the
intervening entity between the physician and
the DHS provider is a physician organization
and the physician has an ownership or investment
interest in that physician organization. 17
The revised definition of “ownership and
investment interest” is pivotal. The revised
rule emphasizes that physicians whose ownership
interests are merely nominal, or titular,
in nature will not stand in the shoes of their
physician organization. These arrangements
include ownership or investment interests in
which the referring physician does not receive
the benefit of such an interest, such as distribution
of profits, dividends, proceeds of sale,
or other types of returns on investments. 18
The impact of these changes and clarifications
is significant, especially for AMCs,
Stark Act
The Stark Act, 42 U.S.C. § 1395nn, is one of the most complex statutes, including
interpretive regulation, that prohibits a physician from referring to a designated
health entity if the physician has a financial arrangement with such entity.
Designated health services include the following: clinical laboratory, physical and
occupational therapy, radiology, radiation therapy and supplies, durable medical
equipment, parenteral and enteral nutrition, prosthetics orthotics and prosthetic
devices, home health, outpatient prescription drugs, and inpatient and outpatient
hospital. Further, financial arrangements include both compensation arrangements
and investment or ownership arrangements.
If a physician has a compensation arrangement with an entity that bills for
designated health services, the physician cannot refer to such entity unless the
arrangement meets all components of an exception. There are numerous
exceptions that apply to the Stark Act, some of which apply only to
investment/ownership arrangements, some that apply only to compensation
arrangements, and some that apply to both ownership/investment arrangements
and compensation arrangements. Each financial arrangement will need to be carefully
analyzed to make sure that either the Stark Act does not apply, or all components of an
applicable exception are met.
Complicating such arrangements further, physicians, under the Stark Act, include all of
the following family members related to the physician: husband or wife; birth or
adopted parent, child, siblings; stepparent, stepchild, stepbrother, or stepsister;
father-in-law, mother-in-law, son-in-law, daughter-in-law, brother-in-law or
sister-in-law; grandparent or grandchild; and spouse of a grandparent or grandchild.
Thus, even if a designated health service entity, like a hospital, is not contracting directly
with a physician, the Stark Act may be implicated if the party with whom the hospital is
contracting is related to a referring physician. The restrictions imposed by the Stark Act
are not eliminated, therefore, merely by contracting with a family member of a .
If you would like more information, visit the Captain Integrity website at
http://www.captainintegrity.com or contact a representative at 1.866.222.0706.
December 2010
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Health Care Compliance Association • 888-580-8373 • www.hcca-info.org