November 4, 2008 Bottom Line

Bottom Line: Understanding the "Stark" Law

Medicare and Medicaid Restrict Physician Self-Referral

Nearly 20 years ago, Rep. Fortney (Pete) Stark (D-Calif.) introduced legislation designed to prevent "self-referrals"—referrals made by a physician to entities with which the physician or a family member has a financial relationship. The legislation prohibits, for example, a physician's referral to a speech-language pathologist at a speech and hearing clinic in which the physician is invested.

The Stark I amendments (1989) apply to clinical laboratories; Stark II (1993) applies to 11 categories of Medicare and Medicaid health services. Speech-language pathology services, durable medical equipment, orthotics, and prosthetics are  included in the Stark II-designated health services. Stark III are Phase III regulations (2007) for the Stark II legislation.

SLPs in private practice who enroll in Medicare (effective July 1, 2009) should be aware of these regulations.* The following are some frequently asked questions about the Stark legislation.

Q: What prompted enactment of the self-referral laws?

The Stark I amendments were prompted by evidence showing that the volume of clinical laboratory tests greatly increased if referring physicians had some degree of ownership in the lab. The Stark II amendments were driven by studies that revealed soaring incidence of radiology procedures and physical therapy when the physician had ownership interest in the radiology or rehabilitation facility.

Q: Do these laws apply to me as an employee or contractor of a physician or physician group?

No. Physician employees or contractors who provide in-office ancillary services are exempt from the self-referral laws. The exemption holds as long as the services are supervised by the referring physician or by another physician in the group practice; rendered in a building where the referring or group physician also furnishes nondesignated services (or in a centralized site used exclusively by the group for providing designated health services); billed by the physician supervising the services, by a group practice of which the physician is a member, or by an entity that is wholly owned by such physician or group practice; and the physician or physician group is normally open at least 35 hours per week with a physician present at least 30 hours or open at least eight hours per week with a physician present at least six hours.

Q: I rent office space from an otolaryngologist. Is she allowed to refer patients to me?

Yes, as long as the physician is not an investor in your practice. The self-referral law does not apply if the physician has no investment interest in your practice (i.e., the financial success of your practice does not result in a share of the profits going to the physician).

Q: Durable medical equipment (DME) is included in the law's self-referral restriction. How does this affect the provision of, for example, speech-generating devices or voice amplifiers?

It is rare that a physician/group would directly supply the device because enrollment as a Medicare DME supplier has many detailed administrative requirements. There is no infringement of the Stark law if the physician has no financial interest in the DME supplier to which the physician refers the patient.

Q: Speech-language pathology does not appear in the list of designated health services in the Stark II law, so why do the regulations apply to us?

The Centers for Medicare and Medicaid Services interpreted "physical therapy" in the law to include speech-language pathology because of a misleading phrase in the Medicare statute. This misleading phrase also caused the problem ASHA encountered when the initial $1,500 annual cap on services was interpreted as being shared between physical therapy and speech-language treatment. 

For more details, see ASHA's "Summary of Self-Referral and Anti-Kickback Regulations Under Medicare and Medicaid." For information about supplier status, visit the ASHA Web site. For additional information, contact reimbursement@asha.org.

* Information in this column is not intended as legal advice but is a general description of prohibitions and permissions. For rulings on specific circumstances, consult with legal counsel. 

Mark Kander, director of health care regulatory analysis, can be reached at 301-296-5669 or mkander@asha.org.

cite as: Kander, M. (2008, November 04). Bottom Line: Understanding the "Stark" Law : Medicare and Medicaid Restrict Physician Self-Referral . The ASHA Leader.

  

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