We are frequently asked about the Stark Law implications of gifts, items or services that a hospital wants to give (or, in some cases, already gave) to referring physicians. The items or services in question are often so small or of such little value that it is hard to believe that giving them to physicians could have any adverse consequences, especially those as serious as violating the federal Stark Law. Unfortunately, however, such consequences do exist, and therefore there are two very important rules regarding the Stark Law that must be kept in mind for these situations:
- there is no Stark Law de minimis exception; and
- as we all know by now, the Stark Law is a strict liability statute (that is, intent does not matter and technical violations count).
That said, it is possible for a hospital to give physicians gifts, or free items or services as long as the hospital meets an applicable Stark Law exception. The trick is identifying the applicable exceptions and strictly complying with all of an exception’s elements no matter how burdensome they may seem given the often nominal value of the gift, item or service being given.
The most widely applicable exception to the Stark Law regarding the provision of gifts or other free items or services is the non-monetary compensation exception. Under this exception, a hospital (or other entity that provides designated health services (DHS entity)) can give a referring physician compensation in the form of items or services (not cash or a cash equivalent) of up to $416 per calendar year in 2019 so long as:
- the compensation is not determined in any manner that takes into account the volume or value of referrals or other business generated by the referring physician;
- the compensation has not been solicited by the physician or the physician’s practice; and
- the compensation arrangement does not violate the federal Anti-Kickback Statute or any other law or regulation governing billing or claims submission.
The following should be kept in mind when using the non-monetary compensation exception:
a. The limit is adjusted annually for inflation. The current limit can be found here.
b. It is essential that the hospital/DHS entity tracks all items or services given to a referring physician for free or less than fair market value to ensure that the annual limit is not exceeded. We recommend that the hospital/DHS entity:
- appoints one person as “log keeper” to be responsible for keeping track of the provision of free or less than fair market value items or services via an electronic log; and
- implements a policy that requires that a person arranging for the giving of the item or service to a referring physician must first confirm with the log keeper that the annual limit for that physician has not yet been exceeded for the year.
c. If the annual limit for a physician is inadvertently exceeded it is possible to continue to comply with the exception if:
- the value of the excess amount is not more than 50% of the current limit;
- the physician returns the excess item (or an amount equal to its value) by the earlier of the end of the calendar year or 180 days after the item or service was received; and
- the physician has not previously received excess compensation which had to be paid back within the previous three years.
d. Compensation given to the referring physician’s family members (those defined as Immediate Family Members under the Stark Law) or staff must be counted towards the physician’s annual limit.
e. The value to be tracked and logged is the fair market value of the item or service, not the cost of the item or service to the hospital/DHS entity.
f. The annual limit is applied per entity, per physician. Accordingly, if a health care system has multiple hospitals or other DHS entities, each entity can give a physician items or services up to the annual limit. Each entity should keep a separate log, although one person may be responsible for maintaining all of the logs system-wide.
g. Items or services given to a referring physician by a parent entity or other non-DHS entity in a system would not qualify for the non-monetary compensation exception. The provision of such items or services would need to be evaluated as to whether it creates an indirect compensation arrangement, and, if it does, whether it meets the indirect compensation exception.
h. A hospital can provide its medical staff one appreciation event per calendar year, the value of which does not need to be tracked for each physician. However, the fair market value of any gifts or tokens of appreciation given at the event must be tracked as described above.
In addition to the non-monetary compensation exception, there are other exceptions that could potentially apply to the provision of gifts or other free items or services to physicians that do not require ongoing tracking. Therefore, prior to relying on the non-monetary compensation exception and tracking the fair market value of any items or services given, consider if one of the following exceptions can be used:
- Employment exception: If the physician being given an item or service is an employee, consider whether the item or service would cause the physician’s overall compensation to exceed fair market value. If not, the item or service may be able to be provided under the employment exception.
- Medical staff exception: If an item or service is being offered to the full medical staff or to all medical staff members within a certain specialty, consider this exception.
- Compliance training exception: The compliance training exception covers the provision of compliance training to physicians, including continuing medical education (CME) provided in connection with the training. Therefore, for any training being provided to physicians on the medical staff, consider whether it complies with this exception.
- CME: While there is no exception specific to the provision of CME, in 2008, CMS provided the Accreditation Council for Continuing Medical Education (ACCME) with clarification regarding the applicability of the Stark Law to the provision of CME. CMS advised ACCME that CME provided to a physician on site at a hospital is not considered remuneration under the Stark Law if the CME “is primarily for the benefit of the hospital’s patients, for example, training on the prevention of nosocomial infection.” Therefore, when providing CME to physicians, consider whether it meets the standard of being primarily for the benefit of the hospital’s patients.