(304) 241-1261 contact@healthgroup.com

Volume 20.37

Section 1877 of the Social Security Act (“the Act”), also known as the physician self-referral law or “Stark Law” prohibits:

  1. A physician from making referrals for certain designated health services (“DHS”) payable by Medicare to an entity with which he or she (or an immediate family member) has a financial relationship, unless an exception applies and
  2. The DHS entity from filing claims with Medicare (or billing another individual, entity, or third-party payor) for those referred services.

A financial relationship is an ownership or investment interest in the entity or a compensation arrangement with the entity.

Designated health services (“DHS”) are any of the following:

  • Clinical laboratory services;
  • Physical therapy, occupational therapy, and outpatient speech-language pathology services;
  • Radiology therapy services and supplies;
  • Parenteral and enteral nutrients, equipment, and supplies;
  • Prosthetics, orthotics, and prosthetic devices and supplies;
  • Home health services;
  • Outpatient prescription drugs; and
  • Inpatient and outpatient hospital services.

The statute establishes specific exceptions and grants the Secretary of the Department of Health and Human Services (“the Secretary”) the authority to create regulatory exceptions for financial relationships that do not pose a risk of program or patient abuse.

The final rule creates new, permanent exceptions to the Stark Law for value-based arrangements.  The final rule permits physicians and other healthcare providers to design and enter value-based arrangements without fear that legitimate activities to coordinate and improve the quality of care for patients and lower costs would violate the Stark Law. The exceptions apply regardless of whether the arrangement relates to care furnished to people with Medicare or other patients.  The new value-based exceptions include safeguards to ensure that the Stark Law continues to provide meaningful protection against overutilization and other harms.  These final policies recognize that incentives are different in a healthcare system that pays for the value, rather than the volume, of services provided.

The final rule also provides additional guidance on several key requirements that must often be met for physicians and healthcare providers to comply with the Stark Law.  For example, compensation provided to a physician by another healthcare provider generally must be at fair market value.  The final rule provides guidance on how to determine if compensation meets this requirement.  The final rule also provides clarity and guidance on a wide range of other technical compliance requirements intended to reduce administrative burden that drives up costs.

These rules provide new flexibility for certain arrangements, such as donations of cybersecurity technology that safeguard the integrity of the healthcare ecosystem, regardless of whether the parties operate in a fee-for-service or value-based payment system.

The final rule is available here.  DHS providers are encouraged to secure experienced legal counsel in any physician compensation and/or physician ownership related matters.