Practice Strategies

Does Your Compensation Plan Meet Stark Regulations?

Under federal laws on self-referral (Stark I and II), it’s illegal to refer Medicare or Medicaid patients to outside labs or other facilities in which the doctors have a direct or even indirect financial interest. That part most of us already know.

But a serious problem occurs when physicians don’t realize that Stark restrictions also apply to in-house or on-site labs if the physician’s compensation is based in part on the volume or value of their referrals. Simply put, if a group’s compensation arrangement encourages or rewards physician members for referring their patients to an in-house lab, it’s probably illegal.

Trouble Is Not The Exception

Many medical groups rely on Stark’s "in-office ancillary services exception," which allows them to refer Medicare and Medicaid patients to on-site clinical and radiology labs without violating the law. But even under that exception, trouble can occur when a physician’s compensation is based directly on the volume or value of his or her lab referrals.

Doctors convicted under this statute are subject to penalties of up to $15,000 for each illegal claim, plus full restitution of all illegal reimbursements. And ignorance of the law is no excuse. The government can impose penalties if a doctor knows—or should know—that the service being billed to Medicare resulted from a prohibited self-referral.

Taking Action

Ensure that you are protected by having a Medicare compliance program in place that covers the division between income and any ancillary services offers solid protection. That means having your program and your compensation formula reviewed by a competent health care attorney who is familiar with Stark regulations. Likewise, individual physicians considering joining a group should first have an experienced attorney review the groups financial structure and compensation arrangement.

For more information about our services to the healthcare industry, Contact:
Maxine Lawyer, Director of Healthcare Services at 972.448.6905.

The articles in this newsletter are general in nature and are not a substitute for accounting, legal, or other professional services. We assume no liability for the reader's reliance on this information. Before implementing any of the ideas contained in this publication, consult a professional advisor to determine whether they apply to your unique circumstances.
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