Legal, Providers

Stark Law Crackdown Jacks Up Fines, Settlements and Physician Pressures

Is a widened enforcement net squeezing physicians unfairly?┬áThat’s the belief of one high-profile author and health policy expert.

Enforcers of anti-kickback laws are turning up the heat on hospitals, health systems and physicians alike, with 2024 on track to see ever increasing penalties and stress on providers.

Commonly known as the Stark Law, the Physician Self-Referral Law (42 U.S.C. §1395nn) of 1989 prohibits physicians from referring patients to receive “designated health services” payable by Medicare or Medicaid from entities with which the physician or an immediate family member has a financial relationship, unless an exception applies.

The goal, of course, is to prioritize helping patients obtain the best available care over physician self-dealing. Healthcare providers who believe they may have violated the Stark Law may report possible infractions within six years through a self-referral disclosure protocol (SRDP).

Experts generally applauded updates to Stark implemented in 2020 designed to relieve Stark administrative burdens. Then, in early 2023, the Centers for Medicare & Medicaid Services again revised the protocol in an aim to streamline SRDP submissions.

As a result, from 2021 to 2023, self-disclosures rose from 27 to 176 – a 552% increase.

Perhaps one motivating factor is the burgeoning size of Stark settlements. For example, late last year, Community Health Network, Inc., of Indianapolis, agreed to pay $345 million to resolve alleged Stark violations – an all-time record.

The settlement sprang from U.S. Department of Justice charges that senior management conspired to hire physicians from private practices at as much as double their salaries for the purpose of capturing “downstream referrals.” A whistleblower former executive reported the scheme in 2014 under the False Claims Act’s (FCA) qui tam provisions.

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A Deep-dive Into Specialty Pharma

A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.

In another qui tam case, regional hospital operator Covenant Healthcare Systems and two of its physicians agreed to pay more than $69 million in a suit brought by a former physician-executive for improper financial relationships between Covenant and its doctors. More typical is a $1.8 million fine in March this year against a Houston neurologist for allegations of Medicare and Medicaid billing for medically unnecessary services and for referring patients to his own diagnostic centers.

However, critics say that the widened Stark enforcement net is not only catching more offenders but is simultaneously squeezing physicians unfairly.

Ramped-up FCA and Stark enforcement is throwing doctors into a vise between patients and corporately owned and managed hospitals, health systems and medical practices, argues Harry Severance, MD, a high-profile author and frequent public speaker on healthcare policy and workplace safety.

As private equity firms and business-focused management teams increasingly take control over American healthcare, doctors complain that pressure to increase provider productivity and profitability is approaching intolerable levels. Patient care subsequently suffers.

Management boards typically function without physician members and defend their earnings-focused decisions as “common business practice,” says Dr. Severance, adjunct assistant professor at Duke University School of Medicine. While acceptable outside of healthcare, such conduct tends to draw doctors into risking FCA/Stark violations, sometimes unknowingly as guidelines and regulations grow.

Dr. Severance points to research finding that primary care physicians need 26.7 hours per day just to follow nationally recommended guidelines for preventive care while also seeing patients.

“[I]f there are no practicing physicians on board, my legal sources tell me that it’s much easier to avoid federal oversight and federal inquiry, especially if presented as ‘common business practice,’…” Dr. Severance told Becker’s ASC Review.

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