Exceptions to the Stark Act

 The current Stark Act includes numerous exceptions.  See 42 U.S.C. § 1395nn(b)-(e). Exceptions include, among others, physician services and in-office ancillary services provided personally or by another physician in the same group practice, prepaid plans in the case of services specified by certain specified organizations and electronic prescribing.  Id.  The Stark Act also authorizes the Secretary of Health and Human Services to make additional exceptions by regulation, where the “financial relationship . . . does not pose a risk of program or patient abuse,” 42 U.S.C. § 1395nn (b) (4). See also Renal Physicians Ass’n v. United States HHS, 489 F.3d 1267, 1269 (D.C. Cir. 2007). 

The most prominent among the exceptions to the Stark Act is the one that allows referrals to labs that are part of the same “group practice.” 42 U.S.C. § 1395nn (b)(2). Elsenety v. Health Care Fin. Admin., 85 Fed. Appx. 405, 409 (6th Cir. 2003).  This exception allows Medicare to be billed for services that are furnished personally by the referring physician or a member of the same group practice:

(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 [lab work], 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 . . . .

 Atl. Urological Assocs., P.A., 549 F. Supp. 2d 20, 22-23.

Another exception to the referral prohibition is for “personal service arrangements” which covers market-rate, pay-for-service arrangements. 42 U.S.C. § 1395nn(e)(3).  “In other words, if the physician’s only financial interest in the clinic is receipt of agreed–upon compensation at or below fair market value for reasonable and necessary services, then the physician may make referrals to the clinic without violating the law.” § 1395nn(e)(3)(A).  See also Renal Physicians Ass’n , 489 F.3d 1267, 1269 (D.C. Cir. 2007).  The Stark Law, however, limits the extent to which the physician’s compensation may be based on the volume or value of patient referrals. § 1395nn(e)(3)(B). The law defines “fair market value” as “the value in arm’s length transactions, consistent with the general market value.” § 1395nn(h)(3).  Obviously, this definition of “fair market value” is critical to determining the scope of the Stark Law exception, and the definition hinges on the term “general market value.”  Renal Physicians Ass’n, 489 F.3d at 1269.


Inside Exceptions to the Stark Act