AMARILLO, TX – This article addresses the applicability of 42 U.S.C. § 1395nn (“Stark Law”) to the practice of a physician providing DME to Medicare patients.

Stark Law
The Stark Law is a federal civil strict liability statute that, unless an exception applies, prohibits physicians (as broadly defined by the Stark Law) from referring patients for designated health services (“DHS”) to an entity with which the physician has a financial relationship.

Definition of DHS
DHS is defined to include DME.

Definition of “Referral” and Explanation of “Personally Provided”
A “referral” is defined as ordering DHS for which payment may be made under Medicare Part B. However, a “referral” does not occur if the DHS is “personally provided” by the referring physician. 42 CFR § 411.351.

The Centers for Medicare and Medicaid Services’ (“CMS’”) commentary in its 2007 Phase III Stark Final Rule provides clarification on the meaning of the phrase “personally provided.” According to the 2007 Final Rule, “there are few, if any, situations in which a referring physician would personally furnish DME and supplies … because doing so would require that the physician … personally perform all of the duties of a supplier as set forth in the supplier standards in § 424.57(c).” See 72 FR 51019, available at https://www.federalregister.gov/d/07-4252/page-51019.

According to the 2007 Final Rule, it is “highly unlikely” that a referring physician would meet the criteria for personally performed services when dispensing DME. “The dispensing of DME by a physician almost always constitutes a “referral” for the physician self-referral statute, as would the dispensing of DME by anyone else affiliated with the referring physician, such as a nurse or physician assistant.” Id. (emphasis added).

If the physician is ordering and furnishing DME for which payments will be made under Medicare Part B, and if the physician is not personally providing the DME, then the physician must comply with a Stark Law exception.

In-Office Ancillary Services (“IOAS”) Exception to the Stark Law
There are multiple Stark Law exceptions, including an exception for IOAS. See 42 CFR 411.355(b). To meet the IOAS exception, the referral for DHS must comply with a number of requirements, including (i) who must furnish the service, (ii) where the service is furnished, and (iii) compliance with applicable Medicare billing and coverage rules. See 42 CFR 411.355(b); CMS, Physician Self-Referral Law Frequently Asked Questions, available at https://www.cms.gov/Medicare/Fraud-and-Abuse/PhysicianSelfReferral/Downloads/FAQs-Physician-Self-Referral-Law.pdf.

While the IOAS exception applies to DHS in general, it does not apply to DME. Having said this, certain products (that fall within the common understanding of DME) are covered by the IOAS exception. An example are urological supplies (e.g., intermittent catheters).

Under the IOAS exception, DHS must be furnished personally by the referring physician, a physician who is a member of the same group as the referring physician, or an individual who is supervised by the physician or by another physician in the group practice. 42 CFR 411.355(b)(1). The DHS must be furnished in the same or a centralized building used for the provision of some or all of the physician’s medical services. 42 CFR 411.355(b)(2). This location requirement is not satisfied if a patient receives a product (e.g., intermittent catheter) by mail outside the physician’s office, as the product would not be dispensed to the patient in the office.

“Put another way, items that are designated health services to which the exception is applicable, such as intermittent catheters (which are prosthetic devices), fall within the scope of the exception for in-office ancillary services only when a patient directly receives the item in the physician’s office and in a manner that is sufficient to meet applicable Medicare billing and coverage rules. The “location requirement” at 42 C.F.R. §411.355(b)(2) would not be satisfied if a patient receives an item by mail outside the physician’s office, as it would not be dispensed to the patient in the office. This is true regardless of whether Medicare coverage and payment rules would permit the supplier to mail the item to the patient and bill the Medicare program for the item

Physician Self-Referral Law Frequently Asked Questions (cms.gov) page 9 (published September 20, 2021)

Summary
Under Stark, a physician cannot bill Medicare/Medicaid for DME that is self-referred to the physician’s patients. This is true regardless of how (and where) the physician provides the DME … and regardless of whether the physician complies with the IOAS exception. Examples are CPAPs, nebulizers, and oxygen concentrators. For a limited number of items, (e.g., intermittent catheters), a physician can provide such products (and bill Medicare/Medicaid) if the IOAS exception is met.

If a physician orders and furnishes DME for which payment will be made under Medicare/Medicaid, a “referral” under Stark occurs unless the DME is personally provided by the physician.

The commentary to the Final Rule states that it is rare for a physician to personally provide DME because physicians rarely perform all activities required by the DMEPOS Supplier Standard to satisfy the “personally provided” definition.

To the extent that a product is covered by the IOAS exception (e.g., intermittent catheters) … and is mailed to a patient’s home … the IOAS exception is not satisfied, and such delivery violates Stark.

Jeffrey S. Baird, JD, is chairman of the Health Care Group at Brown & Fortunato, a law firm with a national health care practice based in Texas. He represents pharmacies, infusion companies, HME companies, manufacturers and other health care providers throughout the United States. Mr. Baird is Board Certified in Health Law by the Texas Board of Legal Specialization and can be reached at (806) 345-6320 or [email protected].