Mini-Stark statute addresses self-referral legal issues

New York has its own "mini-Stark" law addressing referrals to health care entities in which the referring practitioner has an ownership or other financial interest.

 

Section 238-a of NYS Public Health Law is sometimes referred to as “mini-Stark” as it somewhat parallels the federal law by the same name. The rule prohibits financial arrangements and referrals but only applies to certain designated health services, as follows:

           

 1. (a) A practitioner authorized to order clinical laboratory services, pharmacy services, radiation therapy services, physical therapy services or x-ray or imaging services may not make a referral for such services to a health care provider authorized to provide such services where such practitioner or immediate family member of such practitioner has a financial relationship with such health care provider.

(b) A health care provider or a referring practitioner may not present or cause to be presented to any individual or third party payor or other entity a claim, bill, or other demand for payment for clinical laboratory services, pharmacy services, radiation therapy services, physical therapy services or x-ray or imaging services furnished pursuant to a referral prohibited by this subdivision.


Section 2 of the statute excepts the following cases:

(a) practitioners' services-in the case of practitioners' services provided personally by, or under the supervision of, another practitioner in the same group practice as the referring practitioner;

(b) in-office ancillary services-in the case of health or health related items or services (i) that are furnished personally by the referring practitioner, personally by a practitioner who is a member of the same group practice as the referring practitioner, or personally by individuals who are employed by such practitioner or group practice and who are supervised by the practitioner or by another practitioner in the group practice; and in a building in which the referring practitioner, or another practitioner who is a member of the same group practice, furnishes practitioners' services unrelated to the furnishing of such items or services, or in the case of a referring practitioner who is a member of a group practice, in another building which is used by the group practice for the centralized provision of such items or services of the group; and (ii) that are billed by the practitioner performing or supervising the services, by a group practice of which such practitioner is a member, or by an entity that is wholly owned by such practitioner or such group practice;

(c) in the case of health or health related items or services furnished to subscribers of a health maintenance organization operating pursuant to article forty-three of the insurance law or article forty-four of this chapter, participants in a managed care program operating pursuant to section three hundred sixty-four-j of the social services law or persons enrolled in a prepaid health services plan authorized by law;

(d) in the case of a referral for inpatient hospital services, including services by hospital staff practitioners provided in the hospital;

(e) in the case of a referral of a hospital inpatient, outpatient or emergency services patient for clinical laboratory services, pharmacy services, radiation therapy services, physical therapy services or x-ray or imaging services provided by the hospital, including services by hospital staff practitioners provided in the hospital;

(f) in the case of a financial relationship with a general hospital if the financial relationship does not relate specifically to the provision of clinical laboratory services, pharmacy services, radiation therapy services, physical therapy services or x-ray or imaging services for which the referral was made; and

(g) in the case of any other financial relationship which the public health council determines and specifies in regulations, subject to approval by the commissioner, does not pose a substantial risk of payor or patient abuse in relation to patient benefits consistent, to the extent practicable, with financial relationships specified in regulations adopted pursuant to federal law applicable to reimbursement pursuant to title XVIII of the federal social security act (medicare) for clinical laboratory services provided to beneficiaries of title XVIII of the federal social security act (medicare).

            Section 3 provides that an ownership interest or an investment interest:[1]

(a) may be through equity, debt or other means; but

(b) shall not include ownership of investment securities, including shares or bonds, debentures, notes or other debt instruments, which were purchased on terms generally available to the public and which are in a corporation that is listed for trading on the New York stock exchange or on the American stock exchange, or is a national market system security traded under an automated interdealer quotation system operated by the national association of securities dealers, and had, at the end of the corporation's most recent fiscal year, total assets exceeding one hundred million dollars or to the extent such ownership would be permitted by federal law or regulation if the services rendered were clinical laboratory services provided to beneficiaries of title XVIII of the federal social security act (medicare). 

            The statute states that a compensation arrangement shall not include:

 (i) payments made for the rental or lease of office space, if (A) there is a written agreement, signed by the parties, for the rental or lease of the space, which agreement specifies the space covered by the agreement and dedicated for the use of the lessee, provides for a term of rental or lease of at least one year, provides for a payment on a periodic basis of an amount that is consistent with fair market value, provides for an amount of aggregate payments that does not vary, directly or indirectly, based on the volume or value of any referrals of business between the parties, and would be considered to be commercially reasonable even if no referrals were made between the parties; or (B) in the case of rental or lease of office space in which a practitioner who is an interested investor, or an interested investor who is an immediate family member of the practitioner, has an ownership or investment interest, the office space is in the same building as the building in which the practitioner or group practice of which the practitioner is a member has a practice;

 (ii) an arrangement between a general hospital and a practitioner, or immediate family member, for the employment of the practitioner, or immediate family member, or for the provision of administrative services, if the arrangement is for identifiable services, the amount of remuneration under the arrangement is consistent with the fair market value of the services, the remuneration is not determined in a manner that takes into account, directly or indirectly, the volume or value of any referrals by the referring practitioner and such remuneration is provided pursuant to an agreement which would be commercially reasonable even if no referrals were made to the general hospital;

 (iii) an arrangement between a health care provider other than a general hospital and a practitioner if (A) the arrangement is for specific identifiable services as the medical director or as a member of a medical advisory board at the provider, for specific identifiable practitioner services to be furnished to an individual receiving hospice care payable as hospice care, for specific practitioners' services furnished to a non-profit blood center, or for specific identifiable administrative services, other than direct patient care services, but only under exceptional circumstances; and (B) the amount of remuneration under the arrangement is consistent with the fair market value of the services, the remuneration is not determined in a manner that takes into account, directly or indirectly, the volume or value of any referrals by the referring practitioner and such remuneration is provided pursuant to an agreement which would be commercially reasonable even if no referrals were made;

(iv) remuneration which is provided by a general hospital to a practitioner to induce the practitioner to relocate to the geographic area served by the general hospital in order to be a member of the medical staff of the general hospital if the practitioner is not required to refer patients to the hospital and the amount of the remuneration under the arrangement is not determined in a manner that takes into account directly or indirectly the volume or value of any referrals by the referring practitioner;

(v) an isolated financial transaction, such as a one-time sale of property, if the amount of remuneration under the arrangement is consistent with the fair market value, the remuneration is not determined in a manner that takes into account, directly or indirectly, the volume or value of any referrals by the referring practitioner and such remuneration is provided pursuant to an agreement which would be commercially reasonable even if no referrals were made;

 (vi) a compensation arrangement involving payment by a group practice of the salary of a practitioner member of the group practice;

(vii) and provided that any arrangement specified in subparagraphs (i) through (vi) of this paragraph meets such other requirements as the public health council may impose by regulation, subject to approval by the commissioner, as needed to protect against payor or patient abuse consistent with requirements imposed by regulations adopted pursuant to federal law applicable to reimbursement pursuant to title XVIII of the federal social security act (medicare) for clinical laboratory services provided to beneficiaries of title XVIII of the federal social security act (medicare);

(viii) an arrangement between a health care provider and an immediate family member of a practitioner for the employment of the immediate family member which the commissioner determines on application by the parties does not pose a substantial risk of payor or patient abuse in relation to patient benefits subject to such requirements as the commissioner shall determine necessary to protect the public interest, and which for a clinical laboratory that provides services to beneficiaries to title XVIII of the federal social security act (medicare) qualifies for an exception from the prohibitions on such compensation arrangements for purposes of reimbursement of clinical laboratory services pursuant to title XVIII of the federal social security act (medicare). Such application shall be in a form and content specified by the commissioner after consultation with representatives of consumer and physician organizations. The commissioner shall make such determination within sixty days of receipt of a complete application.


 Section 6 provides that:

(a) in the case of clinical laboratory services, pharmacy services, radiation therapy services, physical therapy services or x-ray or imaging services, the request by a practitioner for such services, including the request by a practitioner for a consultation with another practitioner, and any test or procedure ordered by, or to be performed by or under the supervision of that other practitioner, shall constitute a referral by a referring practitioner; and

(b) in the case of clinical laboratory services, pharmacy services, radiation therapy services, physical therapy services or x-ray or imaging services, the request or establishment of a plan of care by a practitioner which includes the provision of clinical laboratory services, pharmacy services, radiation therapy services, physical therapy services or x-ray or imaging services shall constitute a referral by a referring practitioner;

(c) provided further, however, that the following shall not constitute a referral by a referring practitioner:


(i) a request by a practitioner for practitioners' services consisting solely of professional services to be furnished personally by that practitioner, or under that practitioner's supervision;


(ii) a request by a pathologist for clinical diagnostic laboratory tests and pathological examination services, if such services are furnished by or under the supervision of such pathologist pursuant to a consultation requested by another practitioner; and


(iii) a request by a radiologist for diagnostic x-ray or imaging services, if such services are furnished by or under the supervision of such radiologist pursuant to a consultation requested by another practitioner.


The statute further provides:


7. If a referring practitioner or a health care provider furnishing clinical laboratory services, pharmacy services, radiation therapy services, physical therapy services or x-ray or imaging services or any other person or entity collects any amounts that were billed in violation of this section, such referring practitioner and health care provider and other person or entity shall be jointly and severally liable to the payor for any amounts so collected.


8. Each health care provider furnishing clinical laboratory services, pharmacy services, radiation therapy services, physical therapy services or x-ray or imaging services shall submit such information as reasonably may be required by the department for purposes of this title.

 
9. Subdivision one of this section shall apply to an arrangement or scheme, such as a cross-referral arrangement, which the practitioner or health care provider knows or should know has a principal purpose of assuring referrals by the practitioner for clinical laboratory services, pharmacy services, radiation therapy services, physical therapy services or x-ray or imaging services to a particular health care provider which, if the practitioner directly made referrals to such health care provider, would be in violation of subdivision one of this section.
 
10. The public health council shall adopt rules and regulations, subject to approval by the commissioner, necessary to effectuate the provisions and purposes of this title.

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NYS Public Health Law § 2801defines “hospital” to mean:

a facility or institution engaged principally in providing services by or under the supervision of a physician or, in the case of a dental clinic or dental dispensary, of a dentist, for the  prevention, diagnosis or treatment of human disease, pain, injury, deformity or physical condition, including, but not limited to, a general hospital, public health center, diagnostic centertreatment centerdental clinic, dental dispensary, rehabilitation center other than a facility used solely for vocational rehabilitation, nursing home, tuberculosis hospital, chronic disease hospital, maternity hospital, lying-in-asylum, out-patient department, out-patient lodge, dispensary and a laboratory or central service facility serving one or more such  institutions…. (emphasis added)

      NYCRR Section 600.8 (criteria for determining the operation of a diagnostic or treatment center under article 28 of the Public Health Law) defines a “diagnostic or treatment center” as follows:

(a) Any provision of medical or health services by a provider of medical or health services organized as a not-for-profit or business corporation other than a professional service corporation shall constitute the operation of a diagnostic or treatment center. (emphasis added)

(b) It shall be prima facie evidence that a diagnostic or treatment center is being operated when any provider of medical or health services describes itself to the public as a "center, "clinic" or by any name other than the name of one or more of the practitioners providing these services.

(c) A provider of medical or health services that does not come within subdivision (a) or (b) of this section shall be reviewed by the Commissioner of Health to determine whether medical or health services are being provided by practitioners of medicine engaged in private practice or by a facility within article 28 of the Public Health Law. The following criteria shall be used in conducting such reviews:

(1) Patient contact. Patient contact is made directly with the facility rather than the individual physician; or referral is made to the facility by the physician; or provision is made for services by the physician, not in his offices but at another location.

(2) Admission. The decisions as to admissions are made by the facility rather than by the individual practitioner, or by referral agreement or by arrangements with physicians.

(3) Choice of physician. When the physician is not chosen by the patient, the physician is assigned by the facility, or the patient is given a choice among several practitioners associated with or employed by the facility.

(4) Care of patients. Care that is provided patients is the responsibility of the facility and is provided under the following conditions, among others: (i) the facility, rather than the physician assumes responsibility for all services rendered within the facility; (ii) central services, including but not limited to laboratory, pharmacy, X-ray and narcotics are available with no free choice of the provider of such services by the patient; (iii) the facility insures adherence to standards; (iv) the facility is organized into departments or has a multi-disciplined approach; (v) the facility supplies ancillary services; or (vi) the responsibility of the facility terminates on discharge of the patient, as distinguished from the continuing responsibility of the physician; follow-up care is not provided by or at the facility.

(5) Organization and management. (i) Bills and charges are determined by the facility; (ii) medical charts and patient records are maintained by the faculty; (iii) patient care space is provided by the facility; (iv) income distribution is determined by the facility; (v) employees are selected as supervised by the facility; (vi) vital records such as fetal death certificates, etc. are maintained by the facility; (vii) bills are payable to the facility, rather than to the individual practitioner; (viii) the scope of the services to be provided is determined by the facility, subject to regulatory limitations; (ix) the structure is so physically extensive that it exceeds the usual space requirements of the private medical practitioner;(x) the departmental organization is large enough to require delegation of authority to nonmedical personnel; (xi) there is employment of other health professions such as registered nurse, physical therapist, pharmacist; or (xii) the patient registry is more extensive than that found in the usual individual practice. Many more persons are processed than are ordinarily diagnosed or treated by physicians in the private practice of medicine.

(d) The criteria set forth in subdivision (c) of this section shall not be the sole determining factors, but indicators to be considered with such other factors that may be pertinent in particular instances. Professional expertise is to be exercised in the utilization of the criteria. Establishment shall be required where a determination is made that medical services are being provided by a facility within article 28 of the Public Health Law rather than by a private practitioner of medicine. All of the listed indicia of a facility within article 28 of the Public Health Law need not be present in a given instance. The criteria are intended to assist in determining the dominant features of the services offered.[2]



[1] Under section 4, an ownership interest or an investment interest is not subject to the prohibition in section 1 if:

(a) the health care provider authorized to provide clinical laboratory services, pharmacy services, radiation therapy services, physical therapy services or x-ray or imaging services is in a rural area and the referring practitioner or the patient is in such rural area; or

(b) the clinical laboratory services, pharmacy services, radiation therapy services, physical therapy services or x-ray or imaging services are provided by a general hospital, the referring practitioner is authorized to perform services at such general hospital and the ownership or investment interest is in the general hospital itself and not merely in a subdivision thereof; or

(c) the clinical laboratory services, pharmacy services, radiation therapy services, physical therapy services or x-ray or imaging services are provided by an ambulatory surgical center issued an operating certificate pursuant to article twenty-eight of this chapter in conjunction with a surgical procedure performed by the referring practitioner at the ambulatory surgical center;

(d) and if each practitioner who is an interested investor in a health care provider within a category specified in paragraph (a), (b) or (c) of this subdivision and who makes a referral of a patient to such health care provider discloses to the patient, in a brief and reasonable form and manner specified in regulations proposed by the commissioner after consultation with representatives of consumer and physician organizations and adopted by the public health council, subject to approval by the commissioner, the practitioner's, or family member's ownership interest or investment interest in the health care provider and the patient's right to utilize a specifically identified alternative health care provider if any such alternative is reasonably available.

 
5. (a) For the purposes of this section, a compensation arrangement means any arrangement involving any remuneration between a practitioner, or immediate family member, and a health care provider. The term remuneration includes any remuneration, directly or indirectly, overtly or covertly, in cash or in kind.

[2] (e) In addition to the foregoing, any facility which qualifies for an agreement to participate in the Medicare program as an ambulatory surgical center shall constitute a diagnostic and treatment center. The conditions of participation in the Medicare program as an ambulatory surgical center are contained in volume 42 of the Code of Federal Regulations, Public Health, at part 416 (42 CFR part 416), 1984 edition, published by the Office of the Federal Register National Archives and Records Service, General Services Administration. Copies may be obtained from the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402. 42 CFR part 416 is available for public inspection and copying at the Records Access Office, New York State Department of Health, 10th Floor, Corning Tower Building, Empire State Plaza, Albany, NY 12237. (f) The Department of Health may conduct such hearings as may be necessary to gather sufficient facts to make a determination under this section.

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If you have legal questions concerning self-referral, kickbacks and fee-splitting or patient brokering in New York, California, Massachusetts, Washington DC, and other states, contact  a lawyer who knows the rules.

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