SUBMERGED SAFE HARBORS AGAINST STARK ATTACKS:
HOW TO MANAGE THE VAGARIES OF ANTI-KICKBACK AND STARK LAWS
I believe a similar case can be made for all of the other Anti-Kickback safe harbors. Each safe harbor specifies a financial relationship in regulations as required by the first element of the "Other Permissible Exceptions" to Stark. Each safe harbor contains criteria to provide reasonable assurance that the financial relationship does not pose a risk of program or patient abuse as required by the second element of the "Other Permissible Exceptions" to Stark. In short, all Anti-Kickback safe harbors provide protection against possible Stark attacks.
Comparison of Anti-Kickback Safe Harbors and Stark Exceptions
Since Anti-Kickback safe harbors may satisfy one of the statutory exceptions to Stark, it is useful to compare the anti-kickback safe harbors with the Stark exceptions to determine when it may be advantageous to use an Anti-Kickback safe harbor as a statutory exception to Stark. Remember that the legislative history is clear that the converse does not apply: Stark exceptions can not be used as safe harbors from Anti-Kickback laws.
Tables A, B and C analyze the interplay between Anti-Kickback safe harbors and Stark general exceptions by grouping the various safe harbors and exceptions into the following three classes:
Healthcare executives and individual providers would enhance their abilities to manage the vagaries of Anti-Kickback and Stark by studying these tables and appreciating the interplay between Anti-Kickback and Stark. Without regurgitating the information set forth in the Tables, this article will make some observations about the groupings in general and some particular safe harbors/exceptions.
Table A - Areas of Overlap
Table A identifies eight areas where the Anti-Kickback safe harbors and the Stark exceptions overlap. In general, the technical requirements of the Stark exceptions are more difficult to satisfy than the comparable Anti-Kickback safe harbor. For example, the public securities exception of Stark applies only to public corporations having more than $75 million in stockholder equity, while the Anti-Kickback safe harbor applies to all entities (both corporate and non-corporate) having more than $50 million in net tangible assets (without reduction for liabilities).
Anti-Kickback and Stark laws also overlap in the area of risk-sharing arrangements with vastly different technical requirements. The Anti-Kickback statute was amended in 1996 to simply exclude all risk-sharing arrangements from the scope of Anti-Kickback (42 U.S.C. Sec. 1320a-7b(b)(3)(F)). On the other hand, Stark contains no general exception for risk sharing but rather a series of specific cases where risk is shared: group practice, in-office ancillary services, certain services included in composite rates, certain physician incentive plans, and certain group practice services billed by the hospital. Each specific case entails a number of technical requirements in order to avoid a Stark violation. Extreme care should be exercised to ensure risk-sharing arrangements comply with Stark.
As discussed above, overlapping Anti-Kickback safe harbors which are specified in regulations may be used to defend a situation where the technical requirements of Stark are not met but the Anti-Kickback safe harbor is satisfied. This defense will not presently work for risk-sharing arrangements because the arrangements are excluded by the Anti-Kickback statute itself, and safe harbor regulations have not yet been issued. The Stark statute should be amended to allow the same types of risk-sharing arrangements as the Anti-Kickback statute presently allows in order to avoid impeding the development of innovative risk-sharing arrangements.
Table B - Anti-Kickback Safe Harbors without a Similar Stark Exception
Table B identifies seven areas where an Anti-Kickback safe harbor exists without a similar Stark exception. This is the grouping where an Anti-Kickback safe harbor may save an otherwise blatant Stark violation. In the areas of warranties, discounts and waivers of coinsurance or deductibles, large volumes of transactions may implicate Stark even though an Anti-Kickback safe harbor exists. The Government has not yet frequently used Stark as its primary grounds for an attack, but that may be changing in the current political and regulatory climate.
The safe harbor for small entities (60-40 rule) under Anti-Kickback may be used defensively to save those residual financial arrangements which were implicated by Stark when it was expanded from just clinical laboratories to all designated health services effective in 1995. Use of Anti-Kickback safe harbors against Stark attacks has not yet been thoroughly litigated, and as a result I would not recommend using the 60-40 Anti-Kickback safe harbor offensively to structure new arrangements without separately complying with a Stark exception.
Table C - Stark Exceptions without Similar Anti-Kickback Safe Harbor
Table C identifies five areas where a Stark exception exists without a similar Anti-Kickback safe harbor. The legislative history makes it clear that Stark exceptions do not apply to Anti-Kickback. A trap exists for anyone relying on the Stark exceptions for specific providers. While Stark has specific exceptions for hospitals in Puerto Rico, rural providers and hospital ownership, Anti-Kickback has no similar safe harbors in those situations. One would probably have to look to the safe harbors for small entities (60-40 rule) or public securities to find an Anti-Kickback safe harbor. In contrast to Stark, Anti-Kickback always has a back-up defense that no intent to induce referrals existed.
The Stark exception for isolated transactions is the best chance under Stark for saving an innocent arrangement that fails the technical requirements of the other Stark exceptions. Even this exception has a technical requirement that no additional transactions occur between the parties for six months, which significantly limits the utility of the exception.
Columbia/HCA’s Abandoned Strategies
The decisions by Columbia/HCA to eliminate annual cash incentive compensation for the Company's employees, divest its home health care business, discontinue sales of interests in hospitals to physicians and unwind of existing physician interests in hospitals go beyond what the law requires under Anti-Kickback and Stark. Both the Anti-Kickback safe harbors and the Stark exceptions permit cash incentive compensation to employees (see Table A, Item 6 - Employees). Columbia’s ownership of home health agencies is a permitted risk-sharing arrangement under Anti-Kickback (see Table A, Item 8 – Risk-Sharing Arrangements). Stark only applies to physician (not hospital) financial relationships and any indirect ownership by physicians in home health agencies by virtue of stock ownership in Columbia/HCA is permitted under the public corporation exception to Stark (see Table A, Item 1 – Public Securities). Stark expressly permits investments by physicians directly in hospitals (see Table C, Item 1 – Specific Providers). Anti-Kickback also permits certain physician investments in hospitals at the public holding company level under the public securities safe harbor (see Table A, Item 1 – Public Securities) or at the subsidiary level as long as the requirements of the 60-40 rule are satisfied (see Table B, Item 1 – Small Entities).
The business strategies that Columbia is abandoning can be defended under existing safe harbors to Anti-Kickback and exceptions to Stark. The decision to abandon those strategies may be understandable in light of the intense regulatory and media pressure faced by Columbia/HCA. However, before other healthcare providers abandon their similar strategies, they should carefully analyze two issues:
- Can the strategy be well supported under current laws and regulations, including Anti-Kickback, Stark and any applicable state laws?
- Is the strategy still appropriate from an economic and business standpoint?
Several strategies that have developed in healthcare during the last decade may still be appropriate even after this analysis. For example, the notion of integrated healthcare systems remains the trend and can be accommodated within Anti-Kickback and Stark laws. Incentive-based compensation works well in business generally, and for the same reasons should also work in healthcare if properly structured and monitored.
Summary
Anti-Kickback safe harbors and Stark exceptions overlap in many respects. Healthcare executives and individual providers should use extreme care in structuring ownership, compensation and other financial relationships, particularly with respect to Stark, because any failure to satisfy the many technical requirements of the statutory exceptions to Stark will result in violation of Stark. While Stark exceptions may not be used to shelter a financial relationship from Anti-Kickback, Anti-Kickback safe harbors may provide protection against Stark attacks. A thorough understanding of the interplay between Anti-Kickback and Stark is your compass in navigating the Stark-infested waters. Bon voyage!
Links to Tables
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© 1997 Scott C. Withrow. All rights reserved.
NOTE: This site includes a summary of certain compliance issues facing health care providers today. This site does not, and is not intended to, give legal advice. Reference should be made to full text of the statutes and regulations for complete analysis. Consultation with competent counsel is strongly recommended.
