AMARILLO, TX – There are a number of federal anti-fraud laws that DME suppliers need to be aware of. Two of the most important federal laws are the anti-kickback statute (“AKS”) and the physician self-referral statute (“Stark”).
The AKS generally prohibits a person from knowingly and willfully offering, paying, soliciting, or receiving remuneration in exchange for referrals or generating business for items and services that are payable by federal health care programs. If an arrangement implicates the AKS, there are safe harbors that operate to protect certain arrangements.
Several federal circuits have taken the position that if even one purpose of an arrangement is to reward for referrals then an otherwise compliant arrangement would still violate the AKS. If an arrangement fails to meet all of the requirements of a safe harbor, then it does not mean that the arrangement violates the AKS. Rather, the parties to the arrangement will need to examine the arrangement carefully under the wording of the AKS, case law, and other published guidance.
Stark states that if a physician, or an immediate family member of a physician, has a financial relationship with an entity, then (i) the physician is prohibited from making referrals of Medicare and Medicaid patients to such an entity for designated health services (“DHS”) and (ii) the physician is prohibited from presenting or causing to be presented a claim to Medicare or Medicaid, or bill to any individual or third party payor for DHS furnished pursuant to any such referral. Notwithstanding the general prohibition, there are exceptions to Stark that, if met, will protect an arrangement from enforcement by a regulatory agency. Unlike the AKS, Stark is a strict liability statute, which means that in order to meet an exception all of the required elements must be met.
DHS means any of the following services: (i) Clinical Laboratory services, (ii) Physical therapy, occupational therapy, and outpatient speech-language pathology services, (iii) Radiology and certain other imaging services (iv) Radiation therapy services and supplies, (v) Durable medical equipment and supplies (vi) Parenteral and enteral nutrients, equipment, and supplies (vii) Prosthetics, orthotics, and prosthetic devices and supplies (viii) Home health services, (ix) Outpatient prescription drugs, and (x) Inpatient and outpatient hospital services.
CMS defines certain categories of DHS through a List of Current Procedural Terminology (CPT)/Healthcare Common Procedure Coding System (HCPCS) Codes (the “Codes List”). The categories of DHS within the Codes List are clinical laboratory services; physical therapy services, occupational therapy services, outpatient speech-language pathology services; radiology and certain other imaging services; and radiation therapy services and supplies. CMS publishes the Codes List annually online on the CMS website. The other categories of DHS are defined within 42 CFR § 411.351.
One of the most important Stark exceptions is the in-office ancillary services exception (“IOAS”) that applies to both physician ownership/investment arrangements and physician compensation arrangements. The purpose of the IOAS is to enable a physician or a group practice to order and provide DHS in the physician’s office or the group practice’s office.
The IOAS does not mandate how much ownership a physician must have in an entity. However, IOAS does addresses physician ownership in an entity billing for DHS. To qualify for the exception, the DHS must be billed by one of the following:
(i) The physician performing or supervising the service.
(ii) The group practice of which the performing or supervising physician is a member under a billing number assigned to the group practice.
(iii) The group practice if the supervising physician is a “physician in the group practice” under a billing number assigned to the group practice.
(iv) An entity that is wholly owned by the performing or supervising physician or by that physician’s group practice under the entity’s own billing number or under a billing number assigned to the physician or group practice.
(v) An independent third-party billing company acting as an agent of the physician, group practice, or entity (specified in the statute) under a billing number assigned to the physician, group practice, or entity, provided that the billing arrangement meets the requirements of this chapter. A group practice may have, and bill under, more than one Medicare billing number, subject to any applicable Medicare program restrictions.
Thus, under IOAS’s billing requirements an entity may bill for DHS only if it is either “wholly-owned” by the performing or supervising physician or by a group practice. In other words, “the entities must be wholly owned either by the physician performing or supervising the services or by the group practice; joint ventures between group practices and individual group practice physicians or that include other providers or investors do not qualify as wholly owned entities.”
A “group practice” under the IOAS means a physician practice that must meet the following conditions:
- “The group practice must consist of a single legal entity operating primarily for the purpose of being a physician group practice in any organizational form recognized by the State”;
- “The group practice must have at least two physicians who are members of the group (whether employees or direct or indirect owners)”;
- “Each physician who is a member of the group … must furnish substantially the full range of patient care services that the physician routinely furnishes, including medical care, consultation, diagnosis, and treatment, through the joint use of shared office space, facilities, equipment, and personnel”;
- At least 75 percent of the total patient care services of the group practice members “must be furnished through the group and billed under a billing number assigned to the group, and the amounts received must be treated as receipts of the group”; and
- “The overhead expenses of, and income from, the practice must be distributed according to methods that are determined before the receipt of payment for the services giving rise to the overhead expense or producing the income”;
- The group practice must be a unified business having at least the following features: (i) centralized decision making by a body representative of the group practice that maintains effective control over the group’s assets and liabilities …; and (ii) consolidated billing, accounting, and financial reporting.”
As mentioned above, the ownership of the entity can play a role in who may bill for furnished DHS under IOAS. Only the following persons may bill for furnished DHS: the physician performing or supervising the service; the group practice of which that physician is a member under that group practice’s billing number; or an entity that is wholly owned by the referring or supervising physician or the referring or supervising physician’s group practice. A group practice must also meet certain conditions for purposes of the IOAS. See above discussion.
The IOAS exception is often referred to when a physician owns an ambulatory surgery center (“ASC”) or a lab. And while most of the DHS can fit under the IOAS exception, interestingly DME does not fit within the exception. In fact, DME is explicitly excluded from the exception. But then one might ask: “How is it that physicians can sell orthotic products to Medicare patients?” The answer is that Stark does not include orthotic products under the definition of DME.
All of this came to the surface over the past couple of years as CMS solicited comments regarding a relaxation of many of the Stark restrictions. AAHomecare submitted comments urging CMS not to include DME under the IOAS exception. Said another way, it is not in the best interest of patients for physicians to be in the DME business. When the November 20, 2020 Final Rule came out modifying Stark, the exclusion of DME under the IOAS exception remained.
Jeffrey S. Baird, JD, is chairman of the Health Care Group at Brown & Fortunato, PC, 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].
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