A cardiology group practice recently agreed to pay $1.3 million to resolve allegations that it violated the Stark federal physician self-referral law and the False Claims Act by paying its physicians under a compensation formula that considered their referrals for nuclear and CT scans. On Aug. 4, 2014, the Department of Justice (DOJ) announced the settlement with the New York Heart Center, which has nine physicians and serves central and northern New York.
Group practices have substantial flexibility to structure physician compensation in compliance with the Stark Law, particularly in comparison with health systems and other healthcare providers that contract with physicians. Groups, however, are generally not allowed to pay their physicians in a manner that takes into account the volume or value of their referrals of Medicare designated health services (DHS) unless the payments satisfy a special rule permitting group practices to compensate physicians through productivity bonuses and profit shares that may indirectly relate to referrals, or that qualify as de minimis. The government determined the group knew that the formula violated the Stark Law but adopted it anyway.
Until this case, Stark Law enforcement has traditionally focused on financial relationships other than internal compensation arrangements within a group practice. This settlement may be a harbinger of escalating Stark Law scrutiny for group practice compensation. It also provides a reminder of the need for group practices to take care in structuring their compensation arrangements with physicians and other referral sources to comply with the Stark Law and the federal anti-kickback statute, as well as state law, and to periodically review their financial arrangements for compliance.
For further discussion of other Stark Law and False Claims Act settlements, please refer to our Healthcare Alert, Under fire: Physicians’ compensation arrangements.
You can read the DOJ’s press release here.