Summary of the Anti-Referral Stark Amendment (A Stark Remider to Physicians)
Sec. 1395nn. Limitation on certain physician referrals.
(a) Prohibition of certain referrals.
(1) In general.
Except as provided in subsection (b) of this section, if a physician (or an immediate
family member of such physician) has a financial relationship with an entity specified in
paragraph (2), then –
(A) the physician may not make a referral to the entity for the furnishing of
designated health services for which payment otherwise may be made under this subchapter,
and
(B) the entity may not present or cause to be presented a claim under this subchapter
or bill to any individual, third party payor, or other entity for designated health
services furnished pursuant to a referral prohibited under subparagraph (A).
(2) Financial relationship specified.
For purposes of this section, a financial relationship of a physician (or an immediate
family member of such physician) with an entity specified in this paragraph is –
(A) except as provided in subsections (c) and (d) of this section, an ownership or
investment interest in the entity, or
(B) except as provided in subsection (e) of this section, a compensation arrangement
(as defined in subsection (h)(1) of this section) between the physician (or an immediate
family member of such physician) and the entity.
An ownership or investment interest described in subparagraph (A) may be through
equity, debt, or other means and includes an interest in an entity that holds an ownership
or investment interest in any entity providing the designated health service.
(b) General exceptions to both ownership and compensation arrangement
prohibitions. Subsection (a)(1) of this section shall not apply in the following
cases:
(1) Physicians’ services.
In the case of physicians’ services (as defined in section 1395x(q) of this title)
provided personally by (or under the personal supervision of) another physician in the
same group practice (as defined in subsection (h)(4) of this section) as the referring
physician.
(2) In-office ancillary services.
In the case of services (other than durable medical equipment (excluding infusion
pumps) and parenteral and enteral nutrients, equipment, and supplies) –
(A) that are furnished –
(i) personally by the referring physician, personally by a physician who is a member of
the same group practice as the referring physician, or personally by individuals who are
directly supervised by the physician or by another physician in the group practice, and
(ii) (I) in a building in which the referring physician (or another physician who is a
member of the same group practice) furnishes physicians’ services unrelated to the
furnishing of designated health services, or (II) in the case of a referring physician who
is a member of a group practice, in another building which is used by the group practice –
(aa) for the provision of some or all of the group’s clinical laboratory services, or
(bb) for the centralized provision of the group’s designated health services (other
than clinical laboratory services), unless the Secretary determines other terms and
conditions under which the provision of such services does not present a risk of program
or patient abuse, and
(B) that are billed by the physician performing or supervising the services, by a group
practice of which such physician is a member under a billing number assigned to the group
practice, or by an entity that is wholly owned by such physician or such group practice,
if the ownership or investment interest in such services meets such other requirements as
the Secretary may impose by regulation as needed to protect against program or patient
abuse.
(3) Prepaid plans. In the case of services furnished by an organization –
(A) with a contract under section 1395mm of this title to an individual enrolled with
the organization,
(B) described in section 1395l(a)(1)(A) of this title to an individual enrolled with
the organization,
(C) receiving payments on a prepaid basis, under a demonstration project under section
1395b-1(a) of this title or under section 222(a) of the Social Security Amendments of
1972, to an individual enrolled with the organization, or
(D) that is a qualified health maintenance organization (within the meaning of section
300e-9(d) of this title) to an individual enrolled with the organization.
(c) General exception related only to ownership or investment prohibition for
ownership in publicly traded securities and mutual funds. Ownership of the
following shall not be considered to be an ownership or investment interest described in
subsection (a)(2)(A) of this section:
(1) Ownership of investment securities (including shares or bonds, debentures, notes,
or other debt instruments) which may be purchased on terms generally available to the
public and which are –
(A) (i) securities listed on the New York Stock Exchange, the American Stock Exchange,
or any regional exchange in which quotations are published on a daily basis, or foreign
securities listed on a recognized foreign, national, or regional exchange in which
quotations are published on a daily basis, or
(ii) traded under an automated interdealer quotation system operated by the National
Association of Securities Dealers, and
(B) in a corporation that had, at the end of the corporation’s most recent fiscal year,
or on average during the previous 3 fiscal years, stockholder equity exceeding
$75,000,000.
(2) Ownership of shares in a regulated investment company as defined in section 851(a)
of the Internal Revenue Code of 1986, if such company had, at the end of the company’s
most recent fiscal year, or on average during the previous 3 fiscal years, total assets
exceeding $75,000,000.
(d) Additional exceptions related only to ownership or investment prohibition. The
following, if not otherwise excepted under subsection (b) of this section, shall not be
considered to be an ownership or investment interest described in subsection (a)(2)(A) of
this section:
(1) Hospitals in Puerto Rico. In the case of designated health services provided by a
hospital located in Puerto Rico.
(2) Rural provider. In the case of designated health services furnished in a rural area
(as defined in section 1395ww(d)(2)(D) of this title) by an entity, if substantially all
of the designated health services furnished by such entity are furnished to individuals
residing in such a rural area.
(3) Hospital ownership. In the case of designated health services provided by a
hospital (other than a hospital described in paragraph (1)) if –
(A) the referring physician is authorized to perform services at the hospital, and
(B) the ownership or investment interest is in the hospital itself (and not merely in a
subdivision of the hospital).
(e) Exceptions relating to other compensation arrangements. The
following shall not be considered to be a compensation arrangement described in subsection
(a)(2)(B) of this section:
(1) Rental of office space; rental of equipment.
(A) Office space. Payments made by a lessee to a lessor for the use of premises if-
(i) the lease is set out in writing, signed by the parties, and specifies the premises
covered by the lease,
(ii) the space rented or leased does not exceed that which is reasonable and necessary
for the legitimate business purposes of the lease or rental and is used exclusively by the
lessee when being used by the lessee, except that the lessee may make payments for the use
of space consisting of common areas if such payments do not exceed the lessee’s pro rata
share of expenses for such space based upon the ratio of the space used exclusively by the
lessee to the total amount of space (other than common areas) occupied by all persons
using such common areas,
(iii) the lease provides for a term of rental or lease for at least 1 year,
(iv) the rental charges over the term of the lease are set in advance, are consistent
with fair market value, and are not determined in a manner that takes into account the
volume or value of any referrals or other business generated between the parties,
(v) the lease would be commercially reasonable even if no referrals were made between
the parties, and
(vi) the lease meets such other requirements as the Secretary may impose by regulation
as needed to protect against program or patient abuse.
(B) Equipment. Payments made by a lessee of equipment to the lessor of the equipment
for the use of the equipment if –
(i) the lease is set out in writing, signed by the parties, and specifies the equipment
covered by the lease,
(ii) the equipment rented or leased does not exceed that which is reasonable and
necessary for the legitimate business purposes of the lease or rental and is used
exclusively by the lessee when being used by the lessee,
(iii) the lease provides for a term of rental or lease of at least 1 year,
(iv) the rental charges over the term of the lease are set in advance, are consistent
with fair market value, and are not determined in a manner that takes into account the
volume or value of any referrals or other business generated between the parties,
(v) the lease would be commercially reasonable even if no referrals were made between
the parties, and
(vi) the lease meets such other requirements as the Secretary may impose by regulation
as needed to protect against program or patient abuse.
(2) Bona fide employment relationships. Any amount paid by an employer to a physician
(or an immediate family member of such physician) who has a bona fide employment
relationship with the employer for the provision of services if –
(A) the employment is for identifiable services,
(B) the amount of the remuneration under the employment –
(i) is consistent with the fair market value of the services, and
(ii) is not determined in a manner that takes into account (directly or indirectly) the
volume or value of any referrals by the referring physician,
(C) the remuneration is provided pursuant to an agreement which would be commercially
reasonable even if no referrals were made to the employer, and
(D) the employment meets such other requirements as the Secretary may impose by
regulation as needed to protect against program or patient abuse.
Subparagraph (B)(ii) shall not prohibit the payment of remuneration in the form of a
productivity bonus based on services performed personally by the physician (or an
immediate family member of such physician).
(3) Personal service arrangements.
(A) In general. Remuneration from an entity under an arrangement (including
remuneration for specific physicians’ services furnished to a nonprofit blood center) if –
(i) the arrangement is set out in writing, signed by the parties, and specifies the
services covered by the arrangement,
(ii) the arrangement covers all of the services to be provided by the physician (or an
immediate family member of such physician) to the entity,
(iii) the aggregate services contracted for do not exceed those that are reasonable and
necessary for the legitimate business purposes of the arrangement,
(iv) the term of the arrangement is for at least 1 year,
(v) the compensation to be paid over the term of the arrangement is set in advance,
does not exceed fair market value, and except in the case of a physician incentive plan
described in subparagraph (B), is not determined in a manner that takes into account the
volume or value of any referrals or other business generated between the parties,
(vi) the services to be performed under the arrangement do not involve the counseling
or promotion or a business arrangement or other activity that violates any State or
Federal law, and
(vii) the arrangement meets such other requirements as the Secretary may impose by
regulation as needed to protect against program or patient abuse.
(B) Physician incentive plan exception.
(i) In general. In the case of a physician incentive plan (as defined in clause (ii))
between a physician and an entity, the compensation may be determined in a manner (through
a withhold, capitation, bonus, or otherwise) that takes into account directly or
indirectly the volume or value of any referrals or other business generated between the
parties, if the plan meets the following requirements:
(I) No specific payment is made directly or indirectly under the plan to a physician or
a physician group as an inducement to reduce or limit medically necessary services
provided with respect to a specific individual enrolled with the entity.
(II) In the case of a plan that places a physician or a physician group at substantial
financial risk as determined by the Secretary pursuant to section 1395mm(i)(8)(A)(ii) of
this title, the plan complies with any requirements the Secretary may impose pursuant to
such section.
(III) Upon request by the Secretary, the entity provides the Secretary with access to
descriptive information regarding the plan, in order to permit the Secretary to determine
whether the plan is in compliance with the requirements of this clause.
(ii) ”Physician incentive plan” defined. For purposes of this subparagraph, the term
”physician incentive plan” means any compensation arrangement between an entity and a
physician or physician group that may directly or indirectly have the effect of reducing
or limiting services provided with respect to individuals enrolled with the entity.
(4) Remuneration unrelated to the provision of designated health services. In the case
of remuneration which is provided by a hospital to a physician if such remuneration does
not relate to the provision of designated health services.
(5) Physician recruitment. In the case of remuneration which is provided by a hospital
to a physician to induce the physician to relocate to the geographic area served by the
hospital in order to be a member of the medical staff of the hospital, if –
(A) the physician is not required to refer patients to the hospital,
(B) the amount of the remuneration under the arrangement is not determined in a manner
that takes into account (directly or indirectly) the volume or value of any referrals by
the referring physician, and
(C) the arrangement meets such other requirements as the Secretary may impose by
regulation as needed to protect against program or patient abuse.
(6) Isolated transactions. In the case of an isolated financial transaction, such as a
one-time sale of property or practice, if –
(A) the requirements described in subparagraphs (B) and (C) of paragraph (2) are met
with respect to the entity in the same manner as they apply to an employer, and
(B) the transaction meets such other requirements as the Secretary may impose by
regulation as needed to protect against program or patient abuse.
(7) Certain group practice arrangements with a hospital.
(A) In general. An arrangement between a hospital and a group under which designated
health services are provided by the group but are billed by the hospital if –
(i) with respect to services provided to an inpatient of the hospital, the arrangement
is pursuant to the provision of inpatient hospital services under section 1395x(b)(3) of
this title.
(ii) the arrangement began before December 19, 1989, and has continued in effect
without interruption since such date,
(iii) with respect to the designated health services covered under the arrangement,
substantially all of such services furnished to patients of the hospital are furnished by
the group under the arrangement,
(iv) the arrangement is pursuant to an agreement that is set out in writing and that
specifies the services to be provided by the parties and the compensation for services
provided under the agreement,
(v) the compensation paid over the term of the agreement is consistent with fair market
value and the compensation per unit of services is fixed in advance and is not determined
in a manner that takes into account the volume or value of any referrals or other business
generated between the parties,
(vi) the compensation is provided pursuant to an agreement which would be commercially
reasonable even if no referrals were made to the entity, and
(vii) the arrangement between the parties meets such other requirements as the
Secretary may impose by regulation as needed to protect against program or patient abuse.
(8) Payments by a physician for items and services. Payments made by a physician –
(A) to a laboratory in exchange for the provision of clinical laboratory services, or
(B) to an entity as compensation for other items or services if the items or services
are furnished at a price that is consistent with fair market value.
(f) Reporting requirements. Each entity providing covered items or
services for which payment may be made under this subchapter shall provide the Secretary
with the information concerning the entity’s ownership, investment, and compensation
arrangements, including –
(1) the covered items and services provided by the entity, and
(2) the names and unique physician identification numbers of all physicians with an
ownership or investment interest (as described in subsection (a)(2)(A) of this section),
or with a compensation arrangement (as described in subsection (a)(2)(B) of this section),
in the entity, or whose immediate relatives have such an ownership or investment interest
or who have such a compensation relationship with the entity.
Such information shall be provided in such form, manner, and at such times as the
Secretary shall specify. The requirement of this subsection shall not apply to designated
health services provided outside the United States or to entities which the Secretary
determines provides services for which payment may be made under this subchapter very
infrequently.
(g) Sanctions.
(1) Denial of payment. No payment may be made under this subchapter for a designated
health service which is provided in violation of subsection (a)(1) of this section.
(2) Requiring refunds for certain claims. If a person collects any amounts that were
billed in violation of subsection (a)(1) of this section, the person shall be liable to
the individual for, and shall refund on a timely basis to the individual, any amounts so
collected.
(3) Civil money penalty and exclusion for improper claims. Any person that presents or
causes to be presented a bill or a claim for a service that such person knows or should
know is for a service for which payment may not be made under paragraph (1) or for which a
refund has not been made under paragraph (2) shall be subject to a civil money penalty of
not more than $15,000 for each such service. The provisions of section 1320a-7a of this
title (other than the first sentence of subsection (a) and other than subsection (b))
shall apply to a civil money penalty under the previous sentence in the same manner as
such provisions apply to a penalty or proceeding under section 1320a-7a(a) of this title.
(4) Civil money penalty and exclusion for circumvention schemes. Any physician or other
entity that enters into an arrangement or scheme (such as a cross-referral arrangement)
which the physician or entity knows or should know has a principal purpose of assuring
referrals by the physician to a particular entity which, if the physician directly made
referrals to such entity, would be in violation of this section, shall be subject to a
civil money penalty of not more than $100,000 for each such arrangement or scheme. The
provisions of section 1320a-7a of this title (other than the first sentence of subsection
(a) and other than subsection (b)) shall apply to a civil money penalty under the previous
sentence in the same manner as such provisions apply to a penalty or proceeding under
section 1320a-7a(a) of this title.
(5) Failure to report information. Any person who is required, but fails, to meet a
reporting requirement of subsection (f) of this section is subject to a civil money
penalty of not more than $10,000 for each day for which reporting is required to have been
made. The provisions of section 1320a-7a of this title (other than the first sentence of
subsection (a) and other than subsection (b)) shall apply to a civil money penalty under
the previous sentence in the same manner as such provisions apply to a penalty or
proceeding under section 1320a-7a(a) of this title.
(6) Advisory Opinions
(A) In General – The Secretary shall issue written advisory opinions concerning whether
a referral relating to designated health services (other than clinical laboratory
services) is prohibited under this section. Each advisory opinion issued by the Secretary
shall be binding as to the Secretary and the party or parties requesting the opinion.
(B) Application of Certain Rules- The Secretary shall, to the extent practicable, apply
the rules under subsections (b)(3) and (b)(4) and take into account the regulations
promulgated under subsection (b)(5) of section 1128D in the issuance of advisory opinions
under this paragraph.
(C) Regulations- In order to implement this paragraph in a timely manner, the Secretary
may promulgate regulations that take effect on an interim basis, after notice and pending
opportunity for public comment.
(D) Applicability- This paragraph shall apply to requests for advisory opinions made
after the date which is 90 days after the date of the enactment of this paragraph and
before the close of the period described in section 1128D(b)(6).
(h) Definitions and special rules. For purposes of this section:
(1) Compensation arrangement; remuneration.
(A) The term ”compensation arrangement” means any arrangement involving any
remuneration between a physician (or an immediate family member of such physician) and an
entity other than an arrangement involving only remuneration described in subparagraph
(C).
(B) The term ”remuneration” includes any remuneration, directly or indirectly,
overtly or covertly, in cash or in kind.
(C) Remuneration described in this subparagraph is any remuneration consisting of any
of the following:
(i) The forgiveness of amounts owed for inaccurate tests or procedures, mistakenly
performed tests or procedures, or the correction of minor billing errors.
(ii) The provision of items, devices, or supplies that are used solely to –
(I) collect, transport, process, or store specimens for the entity providing the item,
device, or supply, or
(II) order or communicate the results of tests or procedures for such entity.
(iii) A payment made by an insurer or a self-insured plan to a physician to satisfy a
claim, submitted on a fee for service basis, for the furnishing of health services by that
physician to an individual who is covered by a policy with the insurer or by the
self-insured plan, if –
(I) the health services are not furnished, and the payment is not made, pursuant to a
contract or other arrangement between the insurer or the plan and the physician,
(II) the payment is made to the physician on behalf of the covered individual and would
otherwise be made directly to such individual,
(III) the amount of the payment is set in advance, does not exceed fair market value,
and is not determined in a manner that takes into account directly or indirectly the
volume or value of any referrals, and
(IV) the payment meets such other requirements as the Secretary may impose by
regulation as needed to protect against program or patient abuse.
(2) Employee. An individual is considered to be ”employed by” or an ”employee” of
an entity if the individual would be considered to be an employee of the entity under the
usual common law rules applicable in determining the employer-employee relationship (as
applied for purposes of section 3121(d)(2) of the Internal Revenue Code of 1986).
(3) Fair market value. The term ”fair market value” means the value in arms length
transactions, consistent with the general market value, and, with respect to rentals or
leases, the value of rental property for general commercial purposes (not taking into
account its intended use) and, in the case of a lease of space, not adjusted to reflect
the additional value the prospective lessee or lessor would attribute to the proximity or
convenience to the lessor where the lessor is a potential source of patient referrals to
the lessee.
(4) Group practice.
(A) Definition of group practice. The term ”group practice” means a group of 2 or
more physicians legally organized as a partnership, professional corporation, foundation,
not-for-profit corporation, faculty practice plan, or similar association
(i) in which each physician who is a member of the group provides substantially the
full range of services which the physician routinely provides, including medical care,
consultation, diagnosis, or treatment, through the joint use of shared office space,
facilities, equipment and personnel,
(ii) for which substantially all of the services of the physicians who are members of
the group are provided through the group and are billed under a billing number assigned to
the group and amounts so received are treated as receipts of the group,
(iii) in which the overhead expenses of and the income from the practice are
distributed in accordance with methods previously determined,
(iv) except as provided in subparagraph (B)(i), in which no physician who is a member
of the group directly or indirectly receives compensation based on the volume or value of
referrals by the physician,
(v) in which members of the group personally conduct no less than 75 percent of the
physician-patient encounters of the group practice, and
(vi) which meets such other standards as the Secretary may impose by regulation.
(B) Special rules.
(i) Profits and productivity bonuses. A physician in a group practice may be paid a
share of overall profits of the group, or a productivity bonus based on services
personally performed or services incident to such personally performed services, so long
as the share or bonus is not determined in any manner which is directly related to the
volume or value of referrals by such physician.
(ii) Faculty practice plans. In the case of a faculty practice plan associated with a
hospital, institution of higher education, or medical school with an approved medical
residency training program in which physician members may provide a variety of different
specialty services and provide professional services both within and outside the group, as
well as perform other tasks such as research, subparagraph (A) shall be applied only with
respect to the services provided within the faculty practice plan.
(5) Referral; referring physician.
(A) Physicians’ services. Except as provided in subparagraph (C), in the case of an
item or service for which payment may be made under part B of this subchapter, the request
by a physician for the item or service, including the request by a physician for a
consultation with another physician (and any test or procedure ordered by, or to be
performed by (or under the supervision of) that other physician), constitutes a
”referral” by a ”referring physician”.
(B) Other items. Except as provided in subparagraph (C), the request or establishment
of a plan of care by a physician which includes the provision of the designated health
service constitutes a ”referral” by a ”referring physician”.
(C) Clarification respecting certain services integral to a consultation by certain
specialists. A request by a pathologist for clinical diagnostic laboratory tests and
pathological examination services, a request by a radiologist for diagnostic radiology
services, and a request by a radiation oncologist for radiation therapy, if such services
are furnished by (or under the supervision of) such pathologist, radiologist, or radiation
oncologist pursuant to a consultation requested by another physician does not constitute a
”referral” by a ”referring physician”.
(6) Designated health services. The term ”designated health services” means any of
the following items or services:
(A) Clinical laboratory services.
(B) Physical therapy services.
(C) Occupational therapy services.
(D) Radiology services, including magnetic resonance imaging, computerized axial
tomography scans, and ultrasound services.
(E) Radiation therapy services and supplies.
(F) Durable medical equipment and supplies.
(G) Parenteral and enteral nutrients, equipment, and supplies.
(H) Prosthetics, orthotics, and prosthetic devices and supplies.
(I) Home health services.
(J) Outpatient prescription drugs.
(K) Inpatient and outpatient hospital services.
