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11/7/2005
Bryan A. Liang, M.D., Ph.D, J.D.
I am an audiologist working for a private audiology clinic and hearing aid dispensing center. Our facility wants to contract our audiology services to physicians. If we draw up a contract for an hourly rate of fair market value and provide audiologic services that the physician will bill for himself for Medicare reimbursement, is he violating the Stark Law? The contract would stipulate the number of hours per week we would be in his office, the rate per hour he is paying us and the amount of time the contract would last. We would in return like to be one of the top two to three places the physician would refer to.
As always, seek qualified legal advice giving full details of your proposed business arrangements with local counsel before entering into any financial relationships.
As for this question's arrangements, there are several issues that require attention. First, with respect to Stark laws, the question does not indicate whether the services to be provided are "designated health services" that are within its statutory provisions. If not, then the Stark laws do not apply. If so, there is clearly a "financial relationship" with the audiology group through the contract. The physician is also clearly making a referral to the group, for whose services Medicare would ultimately pay the physician. It would seem that the relationship could be a vehicle for the physician to obtain reimbursements, with greater number of referrals for hourly services resulting in greater reimbursements for the physician. Hence, under the terms of the Stark laws, which indicate that the physician may not make a referral to an entity with which he/she has a financial relationship to furnish designated health services for which payment otherwise may be made by a federal health program, this arrangement may be problematic.
More difficult are other fraud and abuse laws. For example, if the physician is billing for services that would otherwise not be eligible for federal program reimbursement (which would seem to be the case, since provision of services by the audiology group would not be billed directly to Medicare and instead be somehow billed by the physician), this would be a false claim. The characterization of unreimbursable audiology services into some reimbursable physician services could implicate the audiology group and subject it to civil and criminal sanctions.
As well, this may be considered a kickback situation in violation of the Antikickback Statute. This arrangement may be construed as a solicitation, receipt, offer of remuneration in return for referring services or recommending or arranging of purchase, lease, or ordering of an item to be paid for by a federal health care program. The audiology group may be offering to enter into the contract and allowing the physician to bill for services "he" supposedly provided in exchange for referrals of his patients to the audiology group for services and products. This situation could also implicate the audiology group and subject it to sanctions.
Overall, I would strongly advise this audiology group to obtain competent legal advice. There are significant issues to be resolved.
Bryan A. Liang, MD, PhD, JD, is Executive Director and Professor of Law, Institute of Health Law Studies, California Western School of Law, and Co-Director and Associate Professor of Anesthesiology, University of California, San Diego School of Medicine, San Diego, CA. His work focuses upon law and its interface with health care, including ethics and conflict of interest issues.
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