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Self-Referral Statute Requires Self-Scrutiny of Practices

Self-Referral Statute Requires Self-Scrutiny of Practices

This article launches a three-part series on Medicare fraud
and abuse laws. It reviews the laws prohibiting self-referrals,
which were expanded this month. Part 2, which will appear in an
upcoming issue of Oncology News International reviews the federal
statutes regarding false claims and offers advice to physicians
on how to avoid any conflicts with the fraud and abuse laws. Part
3 will discuss the Medicare and Medicaid anti-kickback statute.

The federal self-referral prohibition (Stark statute), as initially
written, prohibited the "self-referral" of clinical
laboratory services covered by Medicare. Effective January 1,
1995, the statute was expanded to apply to a much broader range
of "designated health services" covered by Medicare
or Medicaid, including, among other things, radiology, computerized
tomography (CT), magnetic resonance imaging (MRI), ultrasound,
radiation therapy, and hospital services.

Under the expanded statute, generally, a physician may not refer
a patient to an entity with which he or she has a financial relationship
for the provision of any of these designated health services covered
under Medicare or Medicaid.

A physician may have a prohibited financial relationship with
an entity providing health-care services as a result of a compensation
arrangement with the entity, for example, a contract. The physician
may also have a financial relationship as an owner or investor.
Ownership interests include indirect interests in an entity. For
example, a physician owning stock in a corporation that is a partner
in an MRI joint venture will be viewed as having a financial relationship
with the MRI facility.

In addition, the chief counsel for the Office of the Inspector
General (OIG) has stated that a physician receiving payments from
a joint venture under an installment sales contract has "an
ownership by debt" and is barred from referring patients
to the joint venture entity after the effective date of the statute.
Thus, physicians must have been completely paid for their interests
in any joint venture providing newly designated health services
by January 1, 1995, or be precluded from referring Medicare and
Medicaid patients to the entity.

The statute includes various exceptions, which are listed in the

The exception for payments by a physician makes it possible for
physicians to purchase goods and services from an entity at fair
market value without jeopardizing their ability to refer patients
to that entity.


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