The Stark law, or the physician self-referral prohibition, is a law that prohibits doctors and other practicing physicians from referring their patients under Medicare to hospitals in which they are financially interested (Huttinger & Aeddula, 2021). Doctors are not allowed to refer their patients to hospitals they or members of their immediate family own (Keuten et al., 2020). The purpose of this law is to prevent overutilization, increased medical costs, and a warped decision-making process in healthcare. The law was introduced in 1989 under the omnibus budget reconciliation of 1989 (Huttinger & Aeddula, 2021).
Thirty-five states have adopted the Stark law with more restrictions (American Medical Association, 2015). There are three major differences between the federal Stark law and the regional Stark laws in effect. The first major difference is that at the state level, the prohibition goes beyond Medicare as the only reimbursement method and prohibits all manner of self-referral by physicians regardless of the patients’ payment methods. Secondly, referral prohibitions are not restricted to physicians at state levels but also accommodate any licensed practitioner or health service provider in the state. Licensed health service providers include nurses, dentists, dermatologists, optometrists, physical therapists, and other legally recognized practitioners. Lastly, another major difference is the range of services provided(American Medical Association, 2015). The Stark law applies only to referrals for 12 major designated health services (Centers for Medicare & Medicaid, 2018). At the state level, it applies to all health services beyond the 12 defined by federal law.
Management Financial Responsibilities.
Under the Stark law, physicians are not allowed to own, invest in or get direct compensation from payments to services described as designated health services (American Medical Association, 2015). The management should therefore ensure that referrals remain objective. For financial management under the Stark Law, the referrals should remain as objective as possible. Referrals should not be biased or prejudiced towards the centers recommended by the doctors. The decision to refer a patient to the next physician must be based on the collective good and health of the patient (American Medical Association, 2015). Secondly, physicians must declare a conflict of interest to patients when referring them to other physicians. When making these declarations, it is important that the physicians also disclose alternative referral centers to the patient to help them make the right choice. Lastly, patients should not be coerced in any way to choose the referral centers. The physician should not threaten the patient of suspended healthcare services if they decide to go to another facility other than the physician has declared a conflict of interest. Patients must feel free to make their own choices in this regard, and the physician should not interfere with services (American Medical Association, 2015).
Consequences of Legal Breach
According to the office of inspector general, breaking the Starks law means an infraction on the false claims liability act and civil monetary penalties (Centers for Medicare & Medicaid, 2021). The False Claims Liability Act is the federal law that protects the government from fraudulent institutions and individuals. The act states that persons who submit false information to the government are liable to twice the damages caused by the government and a penalty. The civil monetary penalties law allows the Health Secretary to impose penalties on organizations that have committed fraud as far as Medicare and Medicaid are concerned. Such penalties include monetary penalties, which could by far exceed losses incurred by the government (Centers for Medicare & Medicaid, 2018). The organization can also be excluded from future government healthcare plans.
Baldwin Bone and Joint is an orthopedic organization that was charged in an Alabama court for breaking the Starks law. The practice referred patients to untrained physical therapists for services. The untrained personnel were allowed to fill in patient forms but were not allowed to sign off on the documents. The files would then be taken to the real physical therapists, who would sign them for billing. The practice was found guilty of all charges after a former employee turned whistleblower revealed the details to the court. The practice was billed a $1.2 million settlement fine. The decision made by the court was fair. It is quite fortunate that no patients were maltreated or exposed to unnecessary risk. At the same time, the practice recommended patients to external physical therapists and made money from that exercise, which was wrong and uncalled for (Cassi Fambro, 2019).
Another case involved Rialto Capital Management and an affiliate who were charged with breaking the Stark law after finding that they had agreed with two doctors who referred patients to an Indiana Hospital. The management firm allegedly gave loans to the two doctors and did not pursue them on the condition that the referrals continued. The management firm and the hospital were fined $3.6 million. In this case, the doctors were held at ransom because of the loans they had. They had to continue referring patients to the hospital so that their loans would not be reclaimed (US Department of Justice, 2019).
Lastly, in 2020, the West Virginia hospital was found guilty of violating the self-referral law and the anti-kickback statute in a series of events spanning between 2007 and 2020. The hospital allegedly paid physicians more than the market value at the time and gave incentives for referrals. The hospital was found guilty and fined $50 million. Judgments like these are meant to discourage hospitals from breaking the Stark laws through hefty fines. They are also meant to protect the patients’ lives and avoid irrational decision-making due to making profits (US Department of Justice, 2020).
Healthcare Organization Management’s Remedial Steps to Reverse the Non-Compliance Organizations
Under the physician self-referral prohibition, the health organization cannot refer patients to other health organizations in which key people are financially vested (American Medical Association, 2015). Therefore, the healthcare organization is supposed to maintain vigil and ensure that there is company-wide compliance through a series of documented procedures known as the compliance plan (Isayev, 2017). The healthcare organization has several ways mentioned in the compliance plan that ensure due adherence. Some of these ways include incorporating a compliance officer and committee in the organization structure, providing frequent communication to employees, and reporting instances of suspected or confirmed non-compliance to the compliance officer (Isayev, 2017).
The compliance department is composed of the compliance officer and the compliance committee, and it is tasked with ensuring the company adheres to the laws of the land. Compliance is a complex and dynamic process because the rules of society are constantly in revision, which means that what was previously legal could become illegal at a moment’s notice and vice versa. The compliance department is in charge of reviewing government laws and policies and should be part of the decision-making process during considerable structure changes within the organization (Simon, 2018). The Stark law has been amended several times since its inception in the 80s. Compliance departments need to be at par with the Stark laws’ state and federal requirements and constantly advise the management on ratifications and the way forward (Isayev, 2017).
Communication to employees is an effective way of ensuring compliance with the Stark law. While the federal rendition of the Stark law is limited to physicians, state adaptations cover more workers across the entire organizational structure. Maintaining communication through emails, memos, and work seminars and training programs, ensure that employees across the board are constantly reminded of their role in ensuring compliance with the Stark law (Simon, 2018). Employees are continuously reminded to refrain from referring patients to health organizations that would compromise compliance. Employees should also be encouraged to maintain honesty by declaring their level of financial engagement with other health care organizations. In doing so, consultations can be made with the management on legally proceeding with referrals from such institutions forward (Isayev, 2017).
Everyone has a responsibility to report incidences of non-compliance to the management (ICAHN, 2016). Non-compliance attracts hefty fines and damages the reputation of health practitioners and the organization in general (Simon, 2018). Enhancing public trust is an important aspect of ensuring that the organization runs smoothly and is in the best interests of all employees. Therefore, employees should report such incidences to the compliance department for appropriate action to be taken, which will go a long way in ensuring good medical care is given and maintain the organization’s reputation (Isayev, 2017).
References
American Medical Association. (2015). Issue brief: Physician self-referral. 12.
Cassi Fambro. (2019, June 5). Settlement reached in Medicare fraud suit against three Baldwin County medical practices. https://mynbc15.com/news/local/settlement-reached-in-medicare-fraud-lawsuit
Centers for Medicare & Medicaid. (2018). Centers for Medicare & Medicaid. 527–528. https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/index.html
Centers for Medicare & Medicaid. (2021). Medicare Fraud & Abuse: Prevent, Detect, Report. January 2021, 1–21.
Huttinger, R., & Aeddula, N. R. (2021). Stark Law. StatPearls Publishing. https://www.ncbi.nlm.nih.gov/books/NBK559074/
ICAHN. (2016). BASIC FIELD GUIDE TO COMPLIANCE. https://www.healthtechs3.com/wp-content/uploads/Field-Guide-to-Healthcare-Compliance-Manual-FINAL-with-back-cover-for-printing_56pgs.pdf
Isayev, F. (2017). Compliance Function as a Pillar of Modern Corporation. Impact Azerbaijan, 26, 16–18. https://assets.kpmg.com/content/dam/kpmg/az/pdf/ArticlesNPubs/compliance-function-as-a-pillar-of-modern-corporation.pdf
Keuten, M., Lee, A. N., & Smith, J. (2020). Legal Issues. In Office-Based Endovascular Centers (pp. 17–22). Elsevier. https://doi.org/10.1016/B978-0-323-67969-5.00003-4
Simon, M. dellaBadia. (2018). Compliance and High Reliability in a Complex Healthcare Organization. Frontiers of Health Services Management, 34(4), 12–25. https://doi.org/10.1097/hap.0000000000000030
US Department of Justice. (2019, June 3). Rialto Capital Management and Current Owner of Indiana Hospital to Pay $3.6 Million to Resolve False Claims Act Allegations Arising From Kickbacks to Referring Physicians. https://www.justice.gov/opa/pr/rialto-capital-management-and-current-owner-indiana-hospital-pay-36-million-resolve-false
US Department of Justice. (2020, September 9). West Virginia Hospital Agrees To Pay $50 Million To Settle Allegations Concerning Improper Compensation To Referring Physicians. https://www.justice.gov/opa/pr/west-virginia-hospital-agrees-pay-50-million-settle-allegations-concerning-improper
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