Caution: Scrutinize reading agreements before running afoul of Stark

Despite misconceptions that radiologists are not subject to the Stark Law because they don’t refer patients, business relationships with other physicians, including reading agreements, do require compliance and radiologists should scrutinize these arrangements, according to an article published in the December issue of the Journal of the American College of Radiology.

“While a preliminary review of a ‘routine’ arrangement may seem unnecessary, it is far more cost effective to properly structure an arrangement at the front end rather than to try to untangle, explain, or, even worse, defend a potentially improper arrangement,” wrote Hayden Wool, Esq., and colleagues from Garfunkel, Wild law firm in Great Neck, N.Y. “Think of it as preventive care.”

The Stark law is a federal regulation that bars physicians from self-referring patients for designated health services paid by Medicare or Medicaid. Wool and colleagues explained that this covers the technical and professional component of most radiology and imaging services.

Stark regulations don’t just cover self-referrals from physicians with ownership stakes in entities doing the imaging; they also cover a range of financial relationships, including reading agreements or radiologic services agreements to provide the professional component of imaging services, according to the authors. How the Stark law comes into play—and where referrals are exempted—depends on the structure of the reading agreement:

Direct employee – If the agreement states that the radiologist is the direct employee of a non-radiology group, referrals are exempt from prohibition if the employment is for identifiable services, the amount of remuneration is consistent with fair market value and does not consider volume and the agreement is commercially reasonable even if no referrals were made.

Independent contractor – If a physician group contracts with an outside radiologist or radiology group, the applicable Stark law exception would be the “personal services arrangements” exception, explained the authors. This exception requires the arrangement to be specific and set in writing, cover all services to be furnished between groups, and last for at least one year. Aggregate services under contract also must be reasonable and necessary, and compensation must not take volume of referrals into consideration.

In addition to reading agreements, Wool and colleagues touched on the anti-markup rule, a Medicare billing restriction that applies to all diagnostic tests ordered and billed by the same physician or group. This rule limits what the ordering and billing physician may bill Medicare if the ordering physician or group is deemed not to “share a practice” with the physician supervising or performing the technical or professional component of the test.

The authors stressed that Stark law violations can prove extremely costly. Amounts collected for prohibited referrals must be refunded, and additional financial sanctions could apply. “Unlike other fraud and abuse laws, the Stark law is a strict liability statute,” wrote the authors. “In other words, if an existing financial relationship does not fit within an applicable exception, any referrals by a physician for [designated health services] will be deemed to violate the law; the intent of the physician is irrelevant.”