Discussion of the Stark law and referral practices.

Consider this scenario: You are an ophthalmologist in a prominent group practice in your community, which is equipped with all of the current diagnostic instruments. A physician in another practice, with whom you have a cordial relationship, refers a patient to you and asks you to perform an OCT, but there are some conditions. This physician does not want you to interpret the OCT, just run the test and send him the images. Also, he plans to bill Medicare for the OCT.

In essence, you will not provide evaluation and management, but only have a member of your staff take the OCT images of the patient and send them to the other physician. He justifies his request on the basis that an OCT is too expensive to buy. Further, the doctor implies that future referrals to you depend on a positive response to this request. How should you respond?

You should decline this request, but offer instead to provide your assessment of the patient after you perform an exam and, if necessary, an OCT. There are several considerations that influence your response to this request. Together they add up to a powerful justification for your position. Each of these considerations is described below.

Anti-Kickback Statute

The federal Anti-Kickback Statute (AKS) prohibits any person from knowingly or willingly offering, paying, soliciting, or receiving anything of value (“remuneration”) directly or indirectly with the intent to induce or reward business reimbursable under federal health care programs.

In the scenario described above, there would be a violation of the AKS. The referring physician bills for a test for which no cost was incurred, so that is a form of remuneration to him. And for that remuneration (ie, the test images, which are turned into dollars by a claim for reimbursement by Medicare for the OCT) is conditioned on the promise of future patient referrals, which is an intent to induce business reimbursable under a federal health care program — Medicare. Violation of the AKS may subject a physician to criminal penalties or exclusion from the Medicare and Medicaid programs.

Stark Law

The Stark law (or federal self-referral statute), prohibits a physician from referring any designated health services payable by Medicare to an entity with which the physician, or an immediate family member, has a financial relationship (ownership/investment/compensation), unless all the requirements of an applicable exception are met. OCT is a designated health service, so the Stark law could apply.

If one physician has a financial interest in the practice of another physician, then a Stark law violation may exist. The scenario above does not say whether a financial relationship exists, but it is an important consideration.

Medical Error

A physician who does not own an OCT might not be familiar with its operation, the images, the ramifications, how to interpret the images, or how the images might affect treatment. So, there is a potential for medical malpractice. The ophthalmologist who owns the OCT is potentially liable if the patient is mismanaged by the referring physician, because he could have performed the test and provided a skilled interpretation, but chose not to do so to ensure future referrals.

How to Make This Arrangement Legal

There are 2 ways a physician can legally refer a patient to another physician for an OCT. The first way is for the physician to refer the patient to another physician who then performs and bills Medicare for the entire OCT (both the professional and technical components) and send his or her report to the referring physician.

The second way that this can be done legally is for the physician to refer the patient to another physician, who then acquires the OCT images and sends the images to the referring physician. The referring physician can then bill Medicare for the entire service (both technical component and professional component of the OCT) after performing the interpretation. The referring physician must be trained and skilled at interpreting OCTs.

If the second approach is taken, then the Anti-Markup Payment Limitation applies, and the fee schedule amount for the technical component of the OCT would equal the lower of the physician’s net charge to the referring physician for performing the technical component of the OCT; the referring physician’s actual charge; or the fee schedule amount allowed for the jurisdiction where the service was performed.

Conclusion

A physician generally does not own every diagnostic instrument that might be useful to evaluate and manage his or her patients. The economics of capital budgeting decisions precludes it. In this case, we considered OCT a fairly costly diagnostic instrument. A physician who desires an OCT test, but cannot provide it, can refer the patient elsewhere or purchase the test from another provider. An order for an OCT (or other diagnostic test) cannot be leveraged to induce referrals. Legal, ethical, and medical considerations apply in our analysis of this question. GP

John S. McInnes, MD, JD, is an ophthalmologist and an attorney with Arnold & Porter in Washington, DC.

Kevin J. Corcoran, COE, CPC, CPMA, FNAO, is president of Corcoran Consulting Group in San Bernadino, California.