Understanding Internal Self-Referrals
Written by: Ashley Morgan, Partner, Liles Parker PLLC
Healthcare regulations outline legal risks related to internal self-referrals, making it important for both physicians and healthcare organizations to be informed about these issues. While internal referrals may seem like a natural part of integrated healthcare systems, they are heavily regulated under federal and state laws, particularly the Stark Law and the Anti-Kickback Statute (AKS). Violations of these laws can result in significant penalties, including fines, exclusion from federal healthcare programs, and even criminal liability.
Stark Law: A Strict Liability Framework
Stark Law, codified at 42 U.S.C. §1395nn, prohibits physicians from referring Medicare or Medicaid patients for certain designated health services (DHS) to an entity with which they (or an immediate family member) have a financial relationship, unless an exception applies. In addition, this is a strict liability statute, meaning that intent does not need to be proven for a violation to occur.
Key Elements of the Stark Law:
- Designated Health Services (DHS): The Stark law applies to referrals for services including, but not limited to, clinical laboratory services, physical therapy, radiology, durable medical equipment and supplies, home health services, inpatient and outpatient hospital services, and more.
- Financial Relationships: Any ownership interest, investment, or compensation arrangement between the referring physician and the DHS provider is scrutinized.
- Exceptions: There are numerous narrowly drawn exceptions that allow referrals under certain conditions. These exceptions are constantly changing and evolving. Because these arrangements need to be carefully structured with appropriate agreements to satisfy an exception, a physician or provider should not, under any circumstances, attempt to address them without the assistance of qualified counsel.
Because the Stark Law is a strict liability statute, even unintentional violations can lead to severe penalties, including civil monetary penalties, repayment of claims, and exclusion from federal healthcare programs.
The Anti-Kickback Statute
The Anti-Kickback Statute (AKS), codified at 42 U.S.C. §1320a-7b, is broader than the Stark Law and applies to any arrangement where remuneration (anything of value) is offered, paid, solicited, or received to induce or reward referrals of services reimbursable by federal healthcare programs. Unlike the Stark Law, the AKS is a criminal statute and requires intent for a violation to occur; however, actual knowledge or specific intent is not required, meaning a person does not need to have actual knowledge of the law or specific intent to violate AKS.
Key Elements of the AKS:
- Prohibition of Kickbacks: The law prohibits offering or receiving anything of value in exchange for patient referrals.
- Intent Requirement: As stated previously, a person does not need to have actual knowledge of the law or specific intent to violate AKS.
- Safe Harbors: There are numerous safe harbors that permit certain arrangements under AKS if they meet specific conditions. Similar to the Stark Law exceptions, it is important to work with experienced health care counsel to ensure that an arrangement meets the Safe Harbor requirements. Some common Safe Harbors are:
- Space and Equipment Rental Safe Harbor
- Bona Fide Employee Safe Harbor
- Personal Services Safe Harbor
Violations of the AKS carry significant penalties, including criminal fines, imprisonment, exclusion from Medicare and Medicaid, and civil monetary penalties. In addition, the Affordable Care Act amended the federal AKS so that a violation of the law automatically qualifies as a violation of the False Claims Act.
Best Practices for Compliance
To mitigate the risks associated with internal self-referrals, physicians and healthcare organizations should adopt robust compliance programs. Key strategies include:
- Conduct Regular Audits: Routine audits of financial relationships, referral patterns, and contracts can help identify potential compliance issues before they escalate.
- Implement Training Programs: Physicians and administrative staff should receive training on Stark Law, AKS, and other relevant regulations.
- Establish Clear Policies: Internal policies should clearly outline permissible and impermissible referral arrangements.
- Seek Legal Counsel: Healthcare attorneys can help structure financial relationships and contracts to comply with Stark and AKS regulations.
- Use Fair Market Value Assessments: Compensation and financial arrangements should be independently reviewed to ensure fair market value compliance.
- Utilize Stark Law and AKS Exceptions/Safe Harbors: Arrangements should be structured to fit within the available exceptions and safe harbors.
- Implement a Compliance Hotline: Allowing anonymous reporting of potential violations can help detect issues early and prevent liability.
Conclusion
Internal self-referrals pose significant legal risks under the Stark Law and Anti-Kickback Statute. While sending business to a friendly health care provider may seem like a natural practice, it can be extremely problematic in health care. By proactively implementing compliance strategies, educating staff, conducting thorough audits, and consulting legal experts, healthcare providers can reduce exposure to liability and ensure that their referral practices align with federal regulations. As regulatory scrutiny continues to increase, prioritizing compliance is essential for maintaining the integrity and financial health of healthcare organizations.
Take Action Today
Don’t leave your organization’s compliance to chance. Proactively implement robust controls and consult with experts to ensure your referral practices align with Stark Law and the Anti-Kickback Statute. Contact NAMAS today to discuss tailored solutions that safeguard your practice and maintain regulatory integrity.
About the Author:
Ashley Morgan, Partner, Liles Parker PLLC
Ashley Morgan is a Partner in Liles Parker, PLLC’s Washington, DC office. Ms. Morgan represents health care providers across the country in connection with regulatory health care compliance matters, fraud and abuse, and reimbursement issues.
