Throughout most of recorded history, medical ethics has been a purely local matter. Whether or not a physician’s conduct violated the rules for the prescription of services, drugs or devices fell within the exclusive province of state licensing boards. Most states model their ethics codes after the AMA Code of Medical Ethics. As long as a physician adhered to the standards set by the ethics panels of their particular state, they could be assured of a practice free from ethics inquiries.

This all began to change in 1965, when the federal government became the world’s largest provider of health care with the passage of Medicare Parts A and B, and in 2003 with the passage of Medicare Part D. With federal money, came federal regulation. State regulations of medical ethics became federal laws, and in some cases, federal felonies.

Fee Splitting and Kickbacks have always been medically unethical. See, AMA Code of Medical Ethics Rule 6.02 (Doctors can’t pay for referrals); Rule 6.03 (“Clinics, laboratories, hospitals, or other health care facilities that compensate physicians for referral of patients are engaged in fees splitting which is unethical; Rule 6.04 (A physician may not accept any kind of payment or compensation for prescribing drugs or devices from the manufacturer.) Fee splitting is not illegal in other businesses. As stated in the main rule:

“Rule 6.02: Payment by or to a physician solely for the referral of a patient is fee splitting and is unethical. A physician may not accept payment of any kind, in any form, from any source, such as a pharmaceutical company or pharmacist, an optical company, or the manufacturer of medical appliances and devices, for prescribing or referring a patient to said source. In each case, the payment violates the requirement to deal honestly with patients and colleagues. The patient relies upon the advice of the physician on matters of referral. All referrals and prescriptions must be based on the skill and quality of the physician to whom the patient has been referred or the quality and efficacy of the drug or product prescribed.

Self Referral (Stark Law) Stark Law is taken from AMA “Conflict of Interest” Rule 8.032 (and its predecessors) which held, “In general, a physician should not refer a patient to a facility outside of their office, where they do not provide the service or care, when they have an ownership or investment interest in the facility.” A major difference between Stark Law and the AKS, lies in the fact that under Stark Law, any referral for DHS’s (where a financial relationship exists involving a referring physician,) is per se illegal– there need not be a colorable “kickback” involved. A defendant (who need not be a physician) under the AKS may escape liability by proving there actually was no kickback, (either under a safe harbor, or simply as a matter of mathematical fact.) Because Stark Law has its basis in both “fee splitting” and “conflict of interest” ethical rules, physicians are simply held to the higher ethical standard– this is also true because of a peculiar circumstance: the patient’s limited concern over the cost of treatment authorized.

The OIG explains this in its “Roadmap for Physicians,” because the government (and not the patient) is paying the bill, the usual market forces do not apply. (Patients simply do what they are told without regard to cost.) Both the patient and the government must be assured that the referral is being made solely on the basis of reasonable medical necessity, (not because the physician owns the imaging center) and to the most capable provider– not simply to the provider who is the “highest bidder.”

Martin Merritt is recognized as one of the nation’s leading lawyers in the field of medical ethics, and is a nationally recognized Stark Lawyer located in Dallas, Texas. If you would like to schedule a free consultation, please contact us.