Analyzing Financial Relationships under Stark Law – San Diego Health Care Attorney

Stark Law is the federal statute that governs physician self-referral for Medicare patients.  Generally, Stark prohibits a physician from making referrals for certain designated health services (DHS) to an entity with which he or she, or an immediate family member, has a financial interest, with certain exceptions.

In one of our previous blog entries, we gave a Brief Overview of Stark Law, which included a four-step analysis.  To recap, the four-step analysis is below:

  1. Does the arrangement involve a referral of a Medicare patient by a physician or immediate family member of a physician?
  2. Is the referral for DHS?
  3. Is there a financial relationship between the referring physician or a family member and the entity receiving the referral?
  4. Does the arrangement fall within an exception?

This blog post will focus on the third question above – is there a “financial relationship” between the referring physician or a family member and the entity receiving the referral?

There are four basic categories of “financial relationships” under Stark Law:

  1. Direct ownership interests occur when a physician has an ownership or investment interest in an entity that furnishes DHS.  This is the most straight forward type of financial relationship, and in many instances, the easiest one to spot.
  2. Indirect ownership interests occur when a physician has an ownership or investment interests in an entity that, in turn, has an ownership or investment interest in an entity that furnishes DHS.
  3. Direct compensation arrangements occur when a physician receives remuneration directly from, or give remuneration directly to, an entity that furnishes DHS.
  4. Indirect compensation arrangements occur when a physician receives remuneration indirectly from an entity that furnishes DHS.

In regards to direct compensation arrangements, it should be noted that in the case of a physician that has an ownership or investment interests in a physician organization, the physician will “stand in the shoes” of the physician organization, and there will be a direct compensation arrangement, if (i) the referring physician has an ownership or investment interests in a physician organization that is not titular in nature; and (ii) remuneration passes directly between the physician organization and the DHS entity at issue.

When going through a Stark Law analysis, it is important to analyze the type of financial relationship at issue in order to determine whether a Stark violation exists, and also to determine which exceptions to Stark may be at play.

Our firm has experience analyzing Stark Law arrangements, and we would be happy to render our opinion as part of our legal services.  For more information, please contact Vik Chaudhry at the VC Law Group via phone at (858) 519-7333 or email at vik@thevclawgroup.com.