• New Stark Self-Disclosure Protocol
  • April 21, 2011
  • Law Firm: Gordon Feinblatt LLC - Baltimore Office
  • On September 23, 2010, pursuant to the Patient Protection and Affordable Care Act (PPACA), the Centers for Medicare and Medicaid Services (CMS) released a Self-Referral Disclosure Protocol for health care service providers and medical suppliers that may have violated the Stark self-referral prohibition. 

    A.  Background

    The Stark self-referral prohibition prohibits physicians from referring certain designated health services payable by Medicare or Medicaid to an entity with which the physician or the physician's immediate family has an ownership or compensation relationship. The law includes numerous exceptions, such as an exception for bona fide employment relationships between physicians and entities. 

    One consequence of the Stark law is that the charges resulting from referrals from physicians in violation of Stark are overpayments which must be refunded to Medicare or Medicaid.

    For instance, if a physician referred $100,000 in Medicare clinical laboratory services over the course of a year to a hospital that gave the physician a $100 restaurant gift certificate every month during that year, then all $100,000 is due back to Medicare under Stark, unless the gift certificates come under an exception listed in the law. The full $100,000 is due regardless of whether the hospital expressly gave the gift certificates to the physician as a reward for the referrals, and regardless of whether the laboratory8 services referred were otherwise medically necessary. 

    B.  Repayment Plus

    Now, under PPACA and a related 2009 anti-fraud statute, a failure to report a Stark-related overpayment within 60 days of the identification of such overpayment is also a violation of the federal False Claims Act. 

    The False Claims Act prohibits any person from making any knowingly false or fraudulent claim against the federal government, punishable by a civil monetary penalty, plus triple the amount of the false claim. 

    Thus, after the recent legislation, the hospital giving out the $1,200 in gift certificates would be potentially liable for $300,000 in damages, plus a civil monetary penalty. 

    C.  Self Disclosure

    The Self-Referral Disclosure Protocol (SRDP) somewhat softens the effect of these increased sanctions. The SRDP allows a disclosing party to suspend repayment of Stark-related overpayments until the disclosing party reaches a resolution with CMS. It also allows CMS to resolve the overpayment for less than face value based upon a variety of factors. 

    However, CMS may refer a disclosing party to other law enforcement agencies of the federal government, including the Department of Justice. CMS can also use information gained in the disclosure to pursue enforcement actions, if CMS and the disclosing party do not reach a resolution. 

    It is also unclear whether a disclosing party can avoid a whistleblower suit based on an overpayment, if the whistleblower's suit is launched before a resolution is reached with CMS. Further, the SRDP only resolves liability under Stark. The disclosed conduct or practices may also constitute violations of federal anti-kickback laws, as well as state laws.