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 table.

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.