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Stark Law circumvention scheme could be costly

When you first heard of Stark Law, it is possible that you, like many others, assumed it referred to a single statute. Instead, it refers to a whole set of federal laws that regulate physician referrals for Medicare and Medicaid patients. As you likely know, Stark Law generally prohibits doctors from making self-referrals for designated health services (DHS) in which the physician has a financial interest.

The initial Stark Law (proposed by Congressman Pete Stark) is nearly 30 years old, but is still a matter of debate and discussion among doctors often puzzled by just how far the collective measures reach into their professional lives. The American Medical Association has tried to provide some clarity, though the group admits it is only able to provide general information in an introductory manner.

"The Stark Law is complicated," the AMA says, "and its application in any specific situation is heavily dependent on the facts of that unique situation." The group advises doctors to "seek legal advice from retained legal counsel when assessing compliance with the Stark Law."

Nevertheless, the AMA offers some simple examples of the kinds of arrangements and billing behaviors that can get a physician -- or sometimes a pair of doctors -- into legal trouble.

One such arrangement can be found in a circumvention scheme, the AMA says. Doctor A has a financial interest in a diagnostic treatment facility and is, under the Stark Law, not allowed to refer Medicare patients to it. Physician B practices in the same city and has a financial interest in a separate diagnostic treatment facility and is also prohibited by Stark Law from referring Medicare patients to it.

But what if the two doctors agree amongst themselves to refer their patients to each others' diagnostic treatment centers? Both would be involved in a prohibited circumvention scheme, the AMA says, and could be subject to civil penalties that can be up to $15,000 per violation.

Before entering arrangements that have Stark Law implications, physicians should take the AMA's advice and speak to a qualified attorney who understands this complex set of laws. In New York City, you can contact Rivas Goldstein, LLP for more information.

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