Physician-Hospital Relationships’ Adherence to Stark

The federal Stark Law creates a general prohibition against certain physician referrals. The Law’s intention is to prevent the overutilization of services, as well as to eliminate financial conflicts of interest which may affect referral decisions.  In the hospital context, Medicare and Medicaid will not reimburse healthcare services referred by physicians that have a financial relationship with the hospital. The general prohibition is subject to a wide range of exceptions, some of which contain additional specific requirements. It is the various exceptions and the specific requirements of each exception which entangle providers with the Law. The State of Texas, as well as other States, have enacted parallel legislation limiting referrals from physicians to entities with which the referring physician has a financial relationship. A concrete result of the Stark Law and similar state statutes has been a chilling effect on physician-owned ancillary healthcare businesses and business ventures and certain beneficial relationships between physicians and hospitals. 

Many hospitals around the country legitimately contract with physicians for services that will enhance patient care options and better establish ties to the community. The physician and patient is also benefitted by the streaming support a hospital provides. One way in which a hospital may come under scrutiny under the Stark Law is by paying physicians more than fair market value for their work or other contributions to the hospital. Other areas of noncompliance arise when the contract is considered not commercially reasonable, or when the hospital-physician relationship takes into consideration the volume or value of the physician’s referrals and potential referrals.  The key to compliance with the Stark Law, similar states’ laws, and Medicaid and Medicare regulations is to have in place a contract outlining the details of a proper financial relationship between a physician and a hospital and to establish an ongoing system to monitor compliance with the contract.