Any multidisciplinary physician practice or group practice (including practices including CAM practitioners in integrative care centers) should be reviewed by an attorney for self-referral and kickback concerns.




So-called “self-referral” involves referring to an entity in which the practitioner has a financial interest. 


 More specifically, under federal law, the self-referral law, now codified at 42 CFR section 411.353 (“prohibition on certain referrals by physicians and limitations on billing”), also known as “Stark” after its original proponent, Congressman Pete Stark:


(1)   Prohibits a physician from referring patients for certain “designated health services” (DHS) payable by Medicare, to an entity in which the physician (or an immediate family member) has a financial (ownership or compensation) relationship,[1] unless an exception applies.

(2)   Prohibits the entity from filing claims with Medicare (or billing another individual, entity, or third party payer) for those referred services.


            Penalties for violating Stark include denial of payment, refund of payment, imposition of a $15,000 per service civil monetary penalty and a $100,000 civil penalty for each illegal arrangement.



DHS include the following services when payable, in whole or in part, by Medicare:[2]

·         clinical laboratory services;

·         physical therapy services;

·         occupational therapy services;

·         radiology services (including MRI, CT scans, ultrasound services, and nuclear medicine);

·         radiation therapy services and supplies; durable medical equipment and supplies;

·         parenteral and enteral nutrients, equipment and supplies;

·         prosthetics, orthotics, and prosthetic devices and supplies;

·         home health services;

·         outpatient prescription drugs; and

·         inpatient and outpatient hospitalization services.


            To the extent the Center does not offer DHS, the federal self-referral law is inapplicable.


Federal Anti-Kickback Law

The federal anti-kickback law[3] states that whoever knowingly and willfully receives or pays anything of value to influence the referral of federal health care program business, including Medicare and Medicaid, can be held accountable for a felony.


Stark and anti-kickback can concerns potentially can overlap whenever compensation arrangements involve a physician interest in the entity receiving or giving referrals. However, federal anti-kickback is broader than Stark in two respects:


·         The term “whoever” means that unlike Stark, the anti-kickback statute applies to all practitioners, not just “physicians” (so long as the referral is regarding health care services that involve reimbursement under a federal insurance program, such as Medicare, CHAMPUS, or federal employee benefits).


·         While Stark only applies to DHS, the anti-kickback law applies to health services beyond those designated in Stark. 


The Federal Anti-Kickback Statute incurs a criminal violation charge because by definition it requires a specific intent to induce referrals or orders for services.  Anti-Kickback violations are punishable by up to five years in prison, with the potential for additional criminal fines up to $25,000, and administrative civil money penalties reaching as much as $50,000.[4] Additionally, the OIG may commence administrative proceedings to prohibit anyone convicted of an anti-kickback violation from participation in federal and state health care programs or impose civil monetary penalties for fraud, kickbacks, and other prohibited activities.[5]


According to HHS, some of the activities that may violate anti-kickback rules include:

·         Advertising or marketing activities on behalf of health care providers

·         Impressions, page views, or eyeballs, e.g., the number of times that an advertisement is served to a viewer.

·         Click-throughs (e.g., when a viewer of an advertisement clicks through to the vendor).

·          Joint promotion agreements, in which more than one company promotes their projects together.

·         Sponsorships.

·         Slotting fees, e.g., payments for a position on a list of vendors.

·         Strategic Alliances between hospitals and physicians or between group practices.

·         Technology and Content Licensing

·         Affiliate Programs (e.g., referral programs on a revenue sharing basis or a percentage of sales resulting from placement of the advertisement? One method of kickback marketing relies on the sharing of customers between websites that are affiliated as they pass the customer back and forth).

·         Sale of Product or Services

·         Are free products and services offered to encourage their use?

·         Are there up-sells to other products and services, e.g., offering a free baseline or starter service or product, and charging for subsequent or add-on services or products?

·         Are there fees to participate in a network of preferred providers?

·         Are services or products offered for free or at a discount, if other, "full price" products are purchased as a bundle?

·         Publishing Content

·         Does the publication in question charge companies exorbitant fees for article reprints? If so, it may be publishing content just to sell reprints back to the company covered in the story.

·         Subscription fees? Some media companies ask for "scheduling fees" or "subscription fees" to provide editorial coverage to companies. They might get paid $500 for an article, $5,000 for an audio interview, or even $20,000 for a video segment.

·          Advertising revenue (see above)

In response to the concern that some commercial arrangements would be innocuous or beneficial even if technically afoul of anti-kickback prohibitions, the Office of Inspector General (OIG) published thirteen regulatory “safe harbors” in 1991-2. The OIG subsequently clarified these and added new safe harbors for various arrangements. Some of the major safe harbors[6] include:


·         investments in large publicly held health care companies;

·         investments in small health care joint ventures;

·         space rental;

·         equipment rental;

·         personal services and management contracts;

·         sales of retiring physicians’ practices to other physicians;

·         referral services;

·         warranties;

·         discounts;

·         employee compensation;

·         group purchasing organizations;

·         waivers of Medicare Part A inpatient cost-sharing amounts;

·         certain practices in managed care settings.


The safe harbors of particular interest to integrative care practices are:


·         investment in group practices

·         space and equipment rental

·         bona fide employees

·         personal services and management contracts




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With respect to federal anti-kickback law in the Integrative Care center, we can ask the following questions:


·         Does the physician (or other health care practitioner) receive compensation (in any form) in exchange for referring patients to the Center itself and/or to other practitioners in the Center?


·         Similarly, does the Center receive compensation (in any form) from the physician (or other health care practitioner) in exchange for referring patients to the physician (or other health care practitioner)?


            If the answer to either question is “yes,” then there is may be at least a technical violation of the  kickback rules.


            Suppose, for example, that the patient makes the check out to the naturopathic physician, and then the naturopathic physician remits a percentage of that payment to the Center, ostensibly in compensation for administrative services. The mere fact that payment flows from the patient to the practitioner, and then from the practitioner to the Center, could raise a concern that the Center is receiving compensation in exchange for referring patients to the naturopathic physician.


            In other words, if the arrangement is structured so that patients are making the check out to the physician (or other health care practitioner), and the practitioner then remits payment to the Center, this could be regarded as a “kickback” or illegal remuneration to the Center.  This is the way many integrative centers structure their operation prior to contacting us.


            As suggested, the Center should be able to rely on:


·         the investments in group practices safe harbor if the group meets the Stark law definition of group practice.  The requirements of this definition have some limitations for integrative care centers.


·         the rental safe harbor if it meets the rental of office space exception under Stark.


·         The bona fide employment relationship safe harbor if it meets the bona fide employment relationship exception under Stark.


·         The personal service and management contracts safe harbor if it meets the personal services arrangements exception under Stark.


            These are complex provisions of law that we describe elsewhere. 

             In addition, state law should be analyzed to see whether state prohibitions on self-referral, kickbacks, and fee-splitting apply.

[1] For purposes of determining whether a physician has a direct or indirect financial relationship with a DHS entity to which the physician refers, the physician will “stand in the shoes” of the physician organization. 42 CFR 411.351 and 354. Under Stark II the physician organization referred to the physician’s professional medical corporation; under Stark III the physician organization includes the group practice. Wachler & Dresevic, Stark II Phase III: “The Full Picture,” The Health Lawyer (ABA, September 2007), p. 12.

[2] The original statute (Stark I) only prohibited referrals for laboratory services; Stark II expanded the prohibition to the list of designated health services.   Somewhat confusingly, the Health Care Financing Administration (“HCFA”) issued final regulations for Stark II in two phases (“Phase I” and “Phase II”), and then on September 5, 2007, the Centers for Medicare and Medicaid Services (“CMS”)—the federal agency that administers Medicare and Medicaid—issued “Phase III” of the final Stark II regulations at 72 Fed. Reg. 51012 (2007). Phase III republished the entire Stark regulatory text (except for portions relating to advisory opinions). Wachler & Dresevic, p. 3. In addition, the 1996 Health Insurance Portability and Accountability Act (HIPAA) mandated that the OIG furnish advisory opinions to requesting providers seeking guidance on whether a proposed arrangement violates the law.

[3] 42 U.S.C. 1320a-7b(b). See Appendix 3 for the statutory definition.

[5] There is helpful reference material on Stark and anti-kickback law by the Legislation and Regulation by the HHS Agency for Healthcare Research.

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Michael H CohenMichael H Cohen
The Los Angeles / San Francisco / Bay Area-based Michael H Cohen Law Group provides healthcare legal and FDA legal & regulatory counsel to health & wellness practices and ventures, including health technology companies (medical devices to wearable health and nanotech), healthcare facilities (from medical centers to medical spas), and healthcare service providers (from physicians to psychologists).Our legal team offers expertise in corporate & transactional, healthcare regulatory & compliance, and healthcare litigation and dispute resolution, in cutting-edge areas such as anti-aging and functional medicine, telemedicine and m-health, and concierge medicine.Our Founder, attorney Michael H. Cohen, is an author, speaker on healthcare law and FDA law, and internationally-recognized thought leader in the trillion-dollar health & wellness industry.