Featured Article: Stark Law Enforcement Trends

We value your feedback. If you have any comments or suggestions about this newsletter, please get in touch.

Stark Law Enforcement Trends

Linda A. Baumann is a partner in Arent Fox, Washington, DC, where she specializes in health care fraud and abuse and compliance. She is
editor-in-chief of the Bloomberg BNA treatise, Health Care Fraud and Abuse: Practical Perspectives, Second Edition.

Introduction

A number of factors likely are contributing to the recent upsurge in Stark Law enforcement. The unfortunate fact is that Stark Law cases provide a ready source of income to a government trying to balance the budget and keep Medicare afloat. Very briefly stated, under the Stark Law, 42 USC 1395nn, if a physician (or a member of the physician’s immediate family) has any type of financial relationship with an entity that furnishes a specified type of services (“designated health services or DHS”), and the physician refers a Medicare patient to that entity for a DHS, the arrangement must comply with an applicable Stark Law exception. The Stark Law is a prosecutor’s dream since it is a “strict liability” statute. There are numerous technical requirements and health care providers often inadvertently fail to comply with one or more of them. However, even a “technical” failure to comply is a violation of the law, even if none of the parties have improper intent.

Increasing Enforcement and Numerous Gray Areas

It took over a decade for most of the Stark Law’s implementing regulations to be issued. The fact that most of the regulations have been promulgated now is one factor that helps explain why enforcement is increasing at this point. (Note, however, that there are no regulations currently in effect that implement the Stark Law’s applicability to Medicaid.) However, the complexity of the Stark Law and regulations create a fertile environment for government enforcement officials and whistleblowers (qui tam plaintiffs) who frequently allege Stark Law violations as the basis for claims under the False Claims Act. In light of the many gray areas in the law, and the tremendous potential monetary rewards available to whistleblowers, it is not surprising to see so many claims of Stark Law violations. The problem is compounded because, like most other areas related to the health care fraud and abuse laws, relatively few Stark Law cases are litigated. (Most potential defendants are all too well aware of the government’s power to exclude them from participation in federal health care programs; otherwise known as a financial death sentence.) As a result, there are few published judicial opinions and thus very little guidance to help clarify the gray areas. While there are an increasing number of settlements related to the Stark Law, very little information about the facts underlying any of these settlements is ever released; again missing the opportunity to provide greater guidance to health care providers and suppliers who seek to comply with the Stark Law but are frequently unclear about the practical application of the many complex rules.

OIG Self Disclosure Protocol

There are a substantial number of settlements in 2009-2011,that were addressed under the OIG’s Self Disclosure Protocol, that relate to violations of the Stark Law as well as the Anti-Kickback Statute. These OIG self-disclosures are notable because in Mar. 2009, the Inspector General issued “An Open Letter to Health Care Providers” stating that the OIG would no longer accept self-disclosures that only involved liability under the Stark Law. However, some providers choose to use the OIG Protocol and are able to do so if they simultaneously allege a “colorable anti-kickback statute violation.”

CMS Self-Referral Disclosure Protocol

Likely as a result of the OIG’s restriction on the use of its Protocol, the Patient Protection and Affordable Care Act directed CMS to adopt its own Self- Referral Disclosure Protocol (“SRDP”) to help providers and suppliers resolve potential Stark Law violations. CMS promulgated its SRDP in 2010. However, as noted in the newly issued HHS Report to Congress on “Implementation of the Medicare Self-Referral Disclosure Protocol,” while 150 disclosures have been made under the SRDP, only 6 have been resolved thus far through settlement, 51 are currently under review and 61 are on hold pending CMS obtaining additional information.

Stark Law Cases

While it can be difficult to compile information on Stark Law cases, since relatively few are actually filed, the number of investigations related to alleged Stark Law violations appears to be on the upswing as well. Many of the earlier Stark Law cases related to physician leases, personal services agreements, or recruitment arrangements. However there appears to be an increase in cases related to employed physicians. The health care industry has gone through various cycles, and right now numerous hospitals are returning to a physician employment model. Nevertheless, allegations of Stark Law violations in the employment context are somewhat surprising because the Stark exception for employment arrangements is one of the most flexible of the various Stark Law exceptions. The government, particularly the Department of Justice, has publicized its intention to aggressively enforce the health care fraud and abuse laws. Enforcement of the Stark Law appears to be part of this trend, and the criteria in the employment exception is being interpreted in narrow and stringent new ways, e.g., the requirement that an employment arrangement be “commercially reasonable.” There are a few Stark cases on appeal, and their resolution could have a major impact on future Stark Law enforcement.

Conclusion

In light of the government’s need for funds and determination to ferret out the “fraudsters,” Stark Law enforcement is unlikely to decrease any time soon. Individuals and companies doing business in the health care industry are well-advised to stay abreast of current developments in this quickly evolving area of the law in order to reduce their risk of exposure.