Chapter 10.E (or 4.E) -- Referral Fees

Click here to read the referral fee and fraud and abuse provisions governing Medicare and Medicaid
Click here to read the federal false claims act, governing "qui tam" actions.

Advisory rulings under the anti-kickback statute can be found at http://oig.hhs.gov/w-new.asp. 

The Stark law's exception for physician ownership of hospitals has now been eliminated, or at least greatly curtailed, by a provision in the reform law (sec. 6001) that cuts off this exception starting in 2011.  Existing arrangements are grandfathered, but only if the hospital does not expand in size (unless the hospital seeks a waiver based on serving a large low-income population)).

The reform law (sec. 6003) also requires physicians who claim the exemption for expensive in-office ancillary services (such as MRI or CAT scans) to inform their patients who use these services where else they might obtain them in the area. 

Health lawyers complain that Stark and antikickback laws make it difficult to develop the types of collaborations among providers that are needed to coordinate care, reduce costs, and promote quality.   Despite calling for such improvements in health care delivery, the new reform law makes no changes in basic legal rules regarding financial incentives.  However, it allows CMS to authorize innovative payment methods.  For instance, the reform law (sec. 3022) creates a "shared savings" program that shares with approved "accountable care organizations" a portion of the reduced Medicare payments they are able to achieve, while maintaining quality of care. This shared savings idea is the very sort of thing that "gainsharing" rulings continue to prohibit when done on a private basis (between hospitals and physicians), without direct government supervision.

HHS finally finalized it's regulations under the Stark law, 72 Fed. Reg. 51011 (Sept. 5, 2007), but each year it makes further amendments – sometimes twice a year – as part of the rulemakings that update physician and hospital payment rates. So, there is a constant back-and-forth between the agency and regulated industry and it lawyers about adapting the rules’ complexities to the intricacies of how health care delivery and finance are organized (or disorganized). See, e.g., Ramy Fayed, et al., An Overview of CMS’s Latest Proposed Changes to the Stark Regulations, 17 BNA Health L. Rep. 719 (2008). By one account, crafty lawyers and providers seek to exploit technicalities in the rules, clumsy but well-meaning regulators then seek to plug the discovered loopholes, causing new and unsettling ambiguities, which then require further clarification, leading to another round of the same.

An excellent practitioner's treatise is Alice G. Gosfield, Medicare and Medicaid Fraud and Abuse (2008).

The Am Health Lawyers Assoc’s Public Interest Committee has released a whitepaper discussing the public policy dimensions of the Stark Law. “A Public Policy Discussion: Taking Measure of the Stark Law” (2009).

Recent rulings have renewed scrutiny of the potential abuses of hospital-physician joint investments, and the guises under which legitimate joint ventures can form. See Leigh Walton, et al., Hospital Syndications: Opportunities and Options, or Poised for Extinction?, 21(4) ABA Health L. 1 (April 2009); Paul DeMuro, Eye of the Storm: The Government’s Focus on Hospital-Physician Arrangements, 21(5) ABA Health L. 30 (June 2009).

The U.S. Sup. Ct. articulated the intent standard that must be met to bring a False Claims Act case (including a qui tam action), to require proof that the defendant intended to defraud the government, rather than merely having made a false statement that led to an unsupported payment. This is especially relevant when the defendant is a subcontractor, rather than a direct contractor with the government. Allison Engine Co. v. U.S., 553 U.S. ___ (2008).

Under the anti-kickback statute, the new health care reform law (sec. 6402) now declares that specific knowledge of the law is not required to show a violation.

The Florida Sup. Ct. established new precedent in ruling that it's state anti-kickback statute was pre-empted by the federal law.   State v. Harden, 938 So. 2d 480, 495 (Fla. 2006).   See Comment, 112 Penn St. L. Rev. 631-657 (2007).

In a rare ruling, a New York court held that it constitutes illegal "fee-splitting" for a medical school to charge a 10% "dean's tax" on clinical revenues by part-time adjunct faculty members whose clinical practice is not part of the university's medical system and is not supported by the school.  Odrich v. Trustees of Columbia University, 764 N.Y.S.2d 448 (N.Y. App. Div. 2003).   The Washington state Supreme Court ruled that physicians who resell prescription drugs at a mark-up do not violate the state's antikickback statute.  Wright v. Jeckle, 158 Wash.2d 375, 144 P.3d 301 (2006).

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