Frequently Asked Questions

Why Do I Need a Health Lawyer?

Business lawyers are very good at representing businesses. Most of them have absolutely no background in representing physicians in health law matters. With millions of dollars hanging in the balance, depending upon how you structure your next contract, the last thing you need is a business lawyer who asks, “What’s a Stark Law?”

What is Stark Law?

The AMA Code of Medical Ethics, at one time, merely served as a model for state licensing bodies. At worst, if a physician’s marketing plan ran afoul of ethics rules, he or she might get a call to “cut it out.” As the Medicare program began running a deficit, and in essence became insolvent, HHS realized it would be difficult to curb costs by challenging the medical necessity of treatment.  Instead, Congress and federal agencies decided to attack medical capitalism by outlawing referrals of patients at the source.   To do this, the government converted the AMA Code of Ethics into federal offenses which outlaw marketing relationships leading to referrals, or more particularly, billing the government if a referral source is forbidden. Stark Law and the Anti-Kickback Statute are based upon Ethics Opinions 8.032 and 6.02-6.04 respectively.

This proved to be a nightmare of a different sort. Literally interpreted, Stark Law and the AKS outlaw almost every legitimate business relationship and would have been unenforceable without the creation of “Safe Harbors.” Safe Harbors contain a list of requirements for each type of relationship, office rentals, investments, employment contracts, equipment leases, joint ventures, and discounts, to name a few. Many of the safe harbors are published in statutes, which are then interpreted by more specific federal regulations. These are further explained in published Fact Sheets, Special Fraud Alerts, Open Letters, and in CMS manuals.

Physicians need the help of an experience Stark Lawyer to ensure contracts and business models are Medicare and Medicaid compliant.

What constitutes “non-compliance”?

This answer requires constant study of a mind-boggling number of regulations and careful examination of the facts of each case. A provider need not intend to defraud the government, nor is it necessary that the government actually be harmed by a violation. Even where the patient desperately needed the service, and the government legitimately should pay the bill, if the service was rendered by even a technical violation of a regulation, then the prerequisite for submission of the bill has not been satisfied, and the False Claims Act of the Civil Monetary Penalties Act may be violated.

What are the most common violations?

Most violations are not "fraud" at all, but what may best be described as “malum prohibitum.” That act is only wrong, because the government says so.  The most common ways to accidentally violate Fraud and Abuse laws come from “Contracts” or “Relationships” with other providers. These contracts can be perfectly legal in other businesses, such as employment contract between a doctor and a hospital, an office lease between two doctors, a medical directorship agreement with and ASC, an agreement between providers to share leased equipment, or where the physician has an investment interest in a facility to which a patient is referred. Federal regulations set forth a host of “Safe Harbor” regulations which must be strictly followed if the bill for service is to be deemed “compliant.”  This “failure to do what the government dictates” becomes Fraud in the False Claims Act sense, because the government requires a certification that a physician has complied with Stark Law and the AKS. If the physician has in fact failed to comply, the claim is a False Claim, if done knowingly. A physician need not know he has violated a statute, he must simply knowingly do some act that is against a regulation. 

Can You Cite an Example?

A physician owns a free standing building near a hospital. The hospital wishes to lease the building on a handshake deal, even though the space is larger than required, the hospital is willing to pay much more than the fair market value– expecting to make up the difference in referrals from the physician. Rather than a traditional lease, the hospital offers a percentage of the referrals to the physician as payment for the lease. Under these circumstances, the arrangement violates at least seven Anti-Kickback Safe Harbor provisions, which require that such an agreement must be in writing, for at least one year, at a rate set in advance, whi9ch is no more than fair market value, which cannot be greater than necessary for the reasonable needs of the hospital, and which must not take into account the expected number of referrals, or proximity of the space to the hospital.

What are the Chances of Prosecution?

At one time, the False Claims Act was the only way a case could be prosecuted. This required filed by either the Attorney General or a qui tam whistleblower. The whistleblower provision under the False Claims Act provides that any former employee, any contractor, or any person (including federal employees) who learn of a violation to seek up to 30% of the recovery as a bounty. Although most judicial enforcement actions were whistleblower suits, in 1987 Congress passed the CMP law, which permits the OIG to begin an administrative action, without filing suit. As an added incentive, PPACA and many federal statutes provide that agency budgets may now be augmented by the recoveries. Thus, prosecutors and federal agencies are partially funded by the success of enforcement actions. The effect of all of this, is that it is now “open season” on physicians.

What Action is Required?

If you are a medical provider and you have an ownership interest in a facility, or have outside contracts, or agreements of any kind, you may benefit from a low-cost “checkup” of your agreements. Most often, violations are brought to the attention of the government by whistleblowers seeking a bounty. It is important to get out ahead of problems before they result in litigation.

What are the Damages?

First, the government and the patient get the treatment for free, because the hospital and doctor must pay the government back. Second, both may be liable for three times the payment as damages. Third, each may be required to pay a civil penalty of $11,000 for each bill submitted, and $50,000 for AKS violations. Fourth, either may be excluded from the Medicare program. In sum, this is a career-ending, and life-savings destroying catastrophe.

Why is This Important to a Business Lawyer Who Occasionally Represents Physicians?

Used to be, no one paid any attention to Medicare Fraud and Abuse regulations. A doctor would simply ask a business lawyer to draft up a deal between the doctor and a hospital, imaging center, or some facility down the street. Those days are gone. Any contract, lease, office space rental, employment contract, medical directorship, partnership, investment, joint venture, equipment sharing agreement, medical supply contract, or marketing agreement must be reviewed by a Health Lawyer such as Martin Merritt PLLC, to ensure the medical client has not accidentally violated federal Fraud and Abuse regulations.

What is the Danger in not calling Martin Merritt PLLC?

If a Medicare patient was referred between providers, i.e., a physician and hospital, and a lawyer failed to make sure the contract or arrangement between them strictly complies with Medicare rules, neither party may bill Medicare for the service. It does not matter that there was no fraud involved. The bill itself, may be a False Claims Act or CMP Act violation. Each such bill is a separate offense, punishable by a $10,000-$50,000 penalty for each bill.

What is the Worst that Can Happen?

A physician earning say, $100,000 a year can be sued for $50 million or more, then disqualified from accepting Medicare patients, (or even working for an employer who accepts Medicare patients.) And that’s just for a technical violation. If a prosecutor decides to make an example, the physician can be indicted for Health Care Fraud. With the PPACA, it is now a felony for a provider to fail to return any payment within 60 days of discovering an overpayment.

What Happens When I call Martin Merritt PLLC?

For physicians, call us before you sign any agreement. Further, feel free to call us even if you do not currently have a physician contract in the works. Martin will be happy to visit your office and discuss what contracts you have in existence, and you need to do to protect yourself. For business lawyers, if you do need a Health Law consult, you keep the client, Martin Merritt PLLC will do the Health Law aspect of the contract on either a flat rate or hourly basis, depending upon complexity. Martin will guide the client through the Health Law compliance rules and supply the contract language that gives the deal the best chance of success. You draft the remainder of the contract. Like Tax law, there is no guarantee that a contract will ultimately be found to comply with Medicare rules. However, the fact that the client hired a Health Lawyer and did all he could to comply, may very be the thing that keeps him from being prosecuted.

Please let us know if we can be of assistance in your next case.



Martin Merritt, PLLC - Dallas Physician Law. Copyright 2012. All Rights Reserved.