Stark Law

In-Office Anatomic Pathology Laboratories and the Stark Law

(This summary is intended for general information only and does not constitute legal advice. The summary is provided as an understanding of the “Stark Law.” Obtaining of specific legal advice from a healthcare regulatory attorney is strongly encouraged. Your legal counsel may speak with our counsel at any time.)

On January 4, 2001, Health Care Financing Administration (HCFA) issued a final rule relating to section 1877 of the Social Security Act better known as the “Stark Law” or formally known as “Physicians’ Referrals to Health Care Entities With Which They Have Financial Relationships.”

Under Stark, a physician may not make a referral to an entity in which the physician has a financial relationship unless an exception applies. Referral means a request by a physician for a service (such as a laboratory test) paid by the Medicare program. To qualify for an in-office ancillary services exception, services must be furnished personally by the referring physician or by another physician within the group or by an independent physician contractor who is “in the group practice” but not a member of the practice. In order to be “in the group practice” for purposes of the in-office ancillary services exception, the independent physician contractor must have a written contract to provide such services; the contract must qualify under a personal services exception; and, the contract must include reassignment so services of the contract physician can be billed by the group practice.

A group practice must consist of a single legal entity and must have two or more physicians who are members of the group, whether as employees or as owners. The physician contractor’s written contract must specify the services covered, the time frame (generally a year), a termination clause, and the compensation rate which must be at fair market value. Unit of service based compensation is protected as long as it does not change in any manner to take into account the volume of referrals.

The law also requires that in-office ancillary services be furnished in the same building where the referring physician furnishes physician services. The law accommodates group practices with multiple locations (the 75% pathologist time rule). And finally, the “substantially all test” requires that substantially all physician services must be provided through the group and billed under a billing number assigned to the group practice.

The recent changes include pathology coverage for multiple office practices and laboratory location as well as a laboratory sharing model. Regulations regarding the pathologist (the Alternative 1 and 2 Rules) are quite confusing. We can help you with these new regulations in more detail if you call us at 800.280.3785. We have enlisted one of the top health care regulatory attorneys to assist our efforts with regulations. He is available to speak with your counsel to answer any regulatory questions. IOP has considerable experience with the lab sharing model (block shared lease arrangement) and with offices performing biopsy procedures in multiple locations as well as Article 28 situations involving ASC's.

The points raised in Stark are not onerous or difficult to satisfy. IOP is only involved with group practices that wish to own an in-office anatomic pathology laboratory, located within their facilities and existing to serve their patients. IOP has an understanding of the laws and regulations covering laboratories and aims to operate not only within the words of these laws and regulations but also within their intent. We will make your in-office pathology laboratory “Stark proof”.