It's no secret that the Stark Law continues to be a powerful tool in the federal government's arsenal for battling Medicare fraud and abuse. In 2013, enforcement efforts have resulted in a wave of provider settlements involving unlawful physician compensation and referral arrangements, ranging from $60 to a recent $25 million agreement by a large health system in the mountain west. The penalties stemming from a jury trial verdict against a southeastern hospital could be $237 million if the federal government has its way.

On top of the Stark Law liability, CMS' proposed rules for reporting and refunding overpayments would give hospitals only 60 days to report a known violation, after which they may be subject to enforcement under the False Claims Act. The Medicare Self-Referral Disclosure Protocol (the SRDP) offers providers a method for reducing financial liability under Stark, voluntary self-disclosure, but the SRDP is not without its pitfalls.

Lisa Gingerich from von Briesen & Roper discusses Stark Law enforcement, pitfalls for hospitals facing Stark Law problems, and legal strategies to mitigate liability.

1) What do recent Stark Law settlements mean for hospitals? The settlement amounts, which range from trivial amounts to hundreds of millions of dollars, suggest that CMS considers all Stark Law violations worthy of disclosure and settlement. CMS could have told the Ohio hospital that reached a $60 settlement with CMS (Note: no zeros are missing) that the hospital's error was de minimus and to withdraw its disclosure. CMS did not do that. This implies that every Stark Law violation is a violation that is eligible and appropriate for disclosure through the SRDP if a hospital desires a Stark Law compliance clean bill of health.

2) Where may providers run into pitfalls with reporting a Stark violation? Providers will likely be prepared for the time and expense related to preparing and disclosing a violation through the SRDP. The unexpected pitfall is the time it takes for some providers to obtain resolution of their disclosure. Months and years can lapse without any activity. While the disclosure is pending, it is likely reported on all audits, potentially a footnote on financial statements, and the provider may be compelled to put a reasonable amount into reserves so that it can eventually pay the settlement amount. The pending disclosure is a lingering dark cloud in the distance that does not produce rain or storms, but could.

3) What are the consequences for non-compliance with CMS' proposed rules for reporting and refunding overpayments? The intentional failure to repay or disclose a Stark Law violation within 60 days of identifying the overpayment due to the violation becomes a false claim. The liability for what might have been an oversight or petty error leading to the Stark Law violation becomes a crime involving additional penalties, treble damages and possible imprisonment for those involved. The stakes are high for counsel deciding how to advise their provider client especially with the potential that a whistleblower may disclose if the provider does not. The 60-day window that starts once a Stark violation is discovered requires that providers act quickly to assess risk, analyze their options, notify those who need to know and implement a plan. Sixty days may seem like sufficient time, but it passes quickly.

4) How do you see the environment regarding Stark self-disclosure evolving in the future?We hope that the process will become more streamlined, timely and predictable. Ideally, more facts and details regarding the settlement will regularly emerge and will be instructive to other providers seeking to determine their best options and likely outcome under the SRDP. Currently, counsel advising clients whose options include entering into the SRDP have a difficult time assessing how CMS will view the violation, what the settlement amount will be and how long it will take to bring the matter to closure. As CMS reaches and reports more settlements, counsel will have more information upon which to assess the "hole" their client is about to step into.

5) Preventive measures? Providers who implement policies that prohibit payments to referral sources without a corresponding written signed agreement that complies with the Stark Law probably reduce their risk under the Stark Law by more than half. Having a document tracking system that alerts accounts payable when contracts expire, having regular fair market value updates to payment terms when contracts renew and regular confirmation that services are necessary and being provided will prevent another chunk of potential violations. Finally, having a good system for managing the use of provider-owned facilities will address another high risk area. With these measures in place, a provider who has a Stark Law violation occur can honestly characterize the violation as a "slip through" or "one off" and expect to negotiate a modest settlement. Without these measures, the risk of violations increases and likely so will the settlement amounts.

Reprinted from the Advisory Board Company's Daily Briefing, "No Easy Street for Addressing Stark Law Liability," June 28th, 2013, available at: advisory.com