As you may be aware, the Stark Law is one of the most draconian health care fraud and abuse laws in the United States. In short, the Stark Law is implicated when an entity, such as a hospital, has a financial arrangement with a physician. In the event the physician makes a referral to the entity, then the Stark Law may be implicated. However, many individuals and organizations fail to realize that it is actually implicated when a hospital has a financial arrangement with a physician or an immediate family member of a physician. Thus, the Stark Law immediate family member definition becomes supremely important when analyzing the Stark Law implications of any arrangement.
The Immediate Family Member Definition
How Do We Analyze This Issue?
The Stark Law can be a complex area, especially when it comes to complicated arrangements. However, the immediate family member definition is actually only implicated when it comes to the analysis as to whether a financial arrangement exists between the parties. So let’s look at this from a step by step analysis using an example that may or may not apply to your situation.
Example
You operate a durable medical equipment company. You are wanting to grow and you desire to contract with a consultant to assist your company in developing a growth plan. You seek out various sources and find out that Mr. Smith is an independent consultant who works with companies in your area to develop marketing plans. However, after contracting with the individual, you later find out that Mr. Smith’s wife is Carol Smith, D.O. and she regularly refers patients who receive your durable medical equipment.
So obviously there might be a problem here right? The first problem is that the durable medical equipment company did not have a process in place to analyze the relationships “contractors” have with physicians. Remember that a physician is an MD, DO, Dentist, Podiatrist, Chiropractor, or Optometrist. It is always absolutely necessary for every organization, large or small to have a process in place in which contractors will submit documentation highlighting whether or not the individual is an immediate family member under the Stark Law.
The second problem is that we have yet to analyze if or how the Stark Law applies to the specific facts above. The analysis should include the following:
- Does the wife, Carol Smith, D.O., make referrals to the company?
The company needs to ensure that it analyzes how the wife is making referrals to the company. For example, the wife may be making orders for patients that require durable medical equipment. She sees various patients that need walkers and tells her patients that she is going to send them to your company. Your company then fulfills the order with the patient. This would meet the above requirement.
- Does the referral or could it involve the Medicare program? Yes – You always need to assume that some referrals would inherently be reimbursed by a Federal health care program.
- Are the referrals considered designated health services? Yes – In this case, it is always advisable that organizations analyze the specific CPT codes but durable medical equipment by and large is always a designated health service.
- Is there a financial relationship between the referring physician or an immediate family member of the referring physician and the company?
Obviously in this case, the financial relationship is with the husband. The husband is consulting and currently has a contract with the company. Thus, because the requirements above have been met, the Stark Law is implicated.
What Does All of This Mean?
At this point, the Stark Law is implicated. This means that the financial relationship between the company and the immediate family member husband needs to fit within an exception. Likely the personal services exception. Nevertheless, remember that the Stark Law applies to immediate family members and the Stark Law immediate family member definition is broader than most believe. Although the example includes a spouse, as you can see above, many other individual family members are implicated. There are many interesting facts about the Stark Law and we have provided an in depth analysis of paying physicians for non-personally performed services, but remember that it is a law that needs a complete analysis of all the related issues.