Stark Law Regulations Return for Healthcare Professionals | Bennett Thrasher Skip to main content

In the height of the COVID-19 pandemic, the Secretary of the Department of Health and Human Services decided to waive many of the restrictions found in the Physician Self-Referral Law, more commonly known as the Stark Law. The primary intent of the waivers was to increase access to healthcare for those who needed it most due to COVID-19.

However, as the federal government gets ready to end its declaration of a federal state of emergency, the regulations under the Stark Law will likely be going back into effect. Healthcare professionals should be aware of this and should consider the financial and reporting impacts of this change.

Waivers to the Stark Law Requirements due to COVID-19

The Stark Law prohibits physicians from referring patients to another provider with a financial relationship with the referring physician. If the physician made such a referral, he or she faced economic sanctions. Many organizations in the healthcare industry have also had to endure False Claims Act investigations, litigation and penalties over the past several decades related to alleged self-referral violations.

The waivers of Stark Law restrictions due to the COVID-19 emergency essentially removed the potential for any sanctions to support increased patient needs while ensuring provider reimbursement for meeting those needs during the global pandemic.

The waivers also allowed compensation, rents and other financial arrangements between doctors and other providers to be outside of the standard fair market value requirements in certain situations. This waiver allowed healthcare providers, furnishing items and services in good faith, the ability to create new networks and partnerships to improve patient care.

An example of these relationships includes software and technology improvements to provide telehealth services. Additionally, some relationships were also created to curb the significant revenue decrease that resulted when elective procedures were curtailed for a certain period of time.

Moving Ahead after the COVID-19 State of Emergency

The public health emergency declaration is currently predicted to expire in mid-July of 2022, but the date is not yet finalized. President Biden has indicated that he will provide at least a 60-day notice before ending the public health emergency. Nonetheless, compliance will take time, and planning now can be very helpful in ensuring a smooth transition.

As the Stark Law provisions go back into effect, healthcare providers (along with their attorneys) need to review their financial relationships to ensure that those currently in place do not run afoul of the Stark Law. These relationships could include:

  • Rental of office space and equipment
  • Payments for professional clinical services or coverage
  • Telehealth arrangements, including equipment and services
  • Staff sharing arrangements
  • Loans to doctors
  • Personal service agreements with individual physicians or groups

Bringing these agreements into compliance can be a challenge, and it may not be an option in some situations. Unfortunately, because arrangements were entered into quickly in emergency circumstances, there might not be much information or documentation to demonstrate the underlying purpose of the agreements or support the associated payments.

Ensuring Compliance with the Stark Law

Healthcare providers and their counsel should start the process to ensure compliance with the Stark Law before it is required by the federal government or the U.S. Department of Health and Human Services. Ensuring compliance starts with the following steps.

  1. Gather information about the agreement between the parties.

The first step in working toward compliance is to ensure that the actual activities and payments are documented under the current arrangement. Having this information will help accurately set out the agreement in a new or revised document.

  1. Create a cost analysis and budget.

In many agreements, the parties likely did not have time to create a meaningful or comprehensive budget. As part of reviewing these agreements, you need to create a pro forma budget or cost analysis for the scope of the agreement moving forward. A detailed budget helps everyone get on the same page about the agreement and helps foster the working relationship among everyone involved.

This information is also vital to determine whether the terms constitute a fair market value. COVID-19 has had some unique effects on market values for services, including rental values and compensation arrangements. However, having this detailed financial information will help you compare current arrangements with market norms.

  1. Use a competent firm or individual to help you ensure compliance.

A financial professional who has knowledge of the healthcare industry and the various changes the industry has experienced because of COVID-19 will help you determine if the agreement can meet the fair market value test. This professional will also be able to suggest revisions if the agreement does not meet the test. Additionally, a compliance professional who is experienced with the Stark Law can help you review agreements and supporting documentation to ensure that all aspects of the agreement are in compliance with Stark Law regulations.

We’re Here to Help

Bennett Thrasher’s healthcare accounting and auditing professionals can help your organization get back in compliance with the Stark Law. If you have any questions, please contact Patrick Braley by emailing [email protected] or Sara Blair by emailing [email protected].

For more information about recent False Claims Act matters and statistics, click here.