HCA Holdings 2012 Annual Report Download - page 26

Stark Law
The Social Security Act also includes a provision commonly known as the “Stark Law.” The Stark Law
prohibits physicians from referring Medicare and Medicaid patients to entities with which they or any of their
immediate family members have a financial relationship, if these entities provide certain “designated health
services” reimbursable by Medicare or Medicaid unless an exception applies. The Stark Law also prohibits
entities that provide designated health services reimbursable by Medicare and Medicaid from billing the
Medicare and Medicaid programs for any items or services that result from a prohibited referral and requires the
entities to refund amounts received for items or services provided pursuant to the prohibited referral. “Designated
health services” include inpatient and outpatient hospital services, clinical laboratory services and radiology
services. Sanctions for violating the Stark Law include denial of payment, civil monetary penalties of up to
$15,000 per claim submitted and exclusion from the federal health care programs. Entities that receive payment
as a result of services provided to a Medicare patient who is referred by a physician with whom the entity has a
Stark Law non-compliant financial relationship must refund such amounts within the required time period.
Failure to do so may constitute a false or fraudulent claim and may result in civil penalties and additional
penalties under the FCA. The statute also provides for a penalty of up to $100,000 for a circumvention scheme.
There are exceptions to the self-referral prohibition for many of the customary financial arrangements between
physicians and providers, including employment contracts, leases and recruitment agreements. Unlike safe
harbors under the Anti-kickback Statute with which compliance is voluntary, a financial relationship must
comply with every requirement of a Stark Law exception or the arrangement is in violation of the Stark Law.
Although there is an exception for a physician’s ownership interest in an entire hospital, the Health Reform Law
prohibits newly created physician-owned hospitals from billing for Medicare patients referred by their physician
owners. As a result, the law effectively prevents the formation of new physician-owned hospitals after
December 31, 2010. While the Health Reform Law grandfathers existing physician-owned hospitals, it does not
allow these hospitals to increase the percentage of physician ownership and significantly restricts their ability to
expand services.
Through a series of rulemakings, CMS has issued final regulations implementing the Stark Law. Additional
changes to these regulations, which became effective October 1, 2009, further restrict the types of arrangements
facilities and physicians may enter, including additional restrictions on certain leases, percentage compensation
arrangements, and agreements under which a hospital purchases services “under arrangements.” While these
regulations were intended to clarify the requirements of the exceptions to the Stark Law, it is unclear how the
government will interpret many of these exceptions for enforcement purposes. Further, we do not always have
the benefit of significant regulatory or judicial interpretation of the Stark Law and its implementing regulations.
We attempt to structure our relationships to meet an exception to the Stark Law, but the regulations
implementing the exceptions are detailed and complex, and we cannot assure that every relationship complies
fully with the Stark Law.
Similar State Laws
Many states in which we operate also have laws similar to the Anti-kickback Statute that prohibit payments
to physicians for patient referrals and laws similar to the Stark Law that prohibit certain self-referrals. The scope
of these state laws is broad because they can often apply regardless of the source of payment for care, and little
precedent exists for their interpretation or enforcement. These statutes typically provide for criminal and civil
penalties, as well as loss of facility licensure.
Other Fraud and Abuse Provisions
The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) broadened the scope of certain
fraud and abuse laws by adding several criminal provisions for health care fraud offenses that apply to all health
benefit programs. The Social Security Act also imposes criminal and civil penalties for making false claims and
statements to Medicare and Medicaid. False claims include, but are not limited to, billing for services not
rendered or for misrepresenting actual services rendered in order to obtain higher reimbursement, billing for
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