I’m An ASC Owner–Do I Need To Worry About the Stark Law?

For those who own or manage an ambulatory surgery center (ASC), there are numerous regulatory, financial, and operational considerations to navigate. One thing that ASC owners often do not consider is how the Stark Law could impact their operations. In fact, ASC owners may be unaware of the Stark Law. The Stark Law specifically targets physician self-referrals for certain Medicare and Medicaid services. This is what to know about the Stark Law if you own an ASC.

About ASCs

Ambulatory surgery, also referred to as outpatient or same-day surgery, refers to procedures that allow patients to return home on the same day, without the need for an overnight hospital stay. These surgeries are generally minimally invasive or considered low-risk, which helps to reduce recovery time and minimize complications. Advances in surgical techniques, anesthesia, and post-operative care have made it possible to safely perform a wide range of procedures in an outpatient setting, including orthopedic surgeries, endoscopic procedures, and certain cosmetic operations. ASCs not only enhance patient comfort and convenience but also help optimize hospital resources, reducing healthcare costs.

About the Stark Law 

The Stark Law, codified in Section 1877 of the Social Security Act (42 U.S.C. § 1395nn), is a federal statute designed to protect patients and reduce healthcare fraud by limiting the influence of financial self-interest in medical referrals. Specifically, it prohibits physicians from referring Medicare or Medicaid patients for certain services, referred to as “designated health services”, to entities with which the physician or an immediate family member has a financial relationship, unless a statutory exception applies. These relationships may involve ownership interests, investment stakes, or compensation arrangements.

For instance, if a patient requires diagnostic imaging for a sports-related injury and the physician’s sibling owns the imaging center, a referral to that facility would constitute a violation of the law. The regulation is designed to prevent conflicts of interest and ensure that medical decisions are guided solely by the patient’s clinical needs rather than by financial considerations.

Stark Law Violations and Penalties 

If an ASC violates the Stark Law, there are associated penalties. Violations of the Stark Law are civil but carry significant consequences. Penalties may include denial of payment for amounts received by physicians and facilities, civil fines of up to $15,000 per prohibited service, repayment of three times the amount of any improper Medicare funds, and potential exclusion from the Medicare and Medicaid programs. 

Does the Stark Law Affect ASCs?

Pursuant to the definition set forth under the Stark Law, an ASC does not qualify as one of the specifically enumerated Designated Health Services (DHS). Therefore, physician referrals to an ASC in which they hold an ownership or investment interest generally do not trigger the Stark Law’s self-referral prohibitions. This distinction is significant because the Stark Law broadly restricts physician referrals of Medicare patients to DHS when a financial relationship exists between the physician and the receiving entity. By excluding ASC services from the DHS category, the statute permits physicians to maintain ownership stakes in ASCs without automatically violating federal self-referral restrictions, provided that the ASC does not separately furnish or bill for any designated health services.

Nevertheless, ASCs and their physician investors must remain vigilant in adhering to other federal fraud and abuse laws, particularly the Anti-Kickback Statute, which continues to apply to financial relationships and referral arrangements involving beneficiaries of federal healthcare programs.

About the Anti-Kickback Statute 

The Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b)) criminalizes knowingly offering, paying, soliciting, or receiving any remuneration to induce or reward referrals of federally funded healthcare services. The Anti-Kickback Statute prohibits any individual or entity from “knowingly and willfully” offering, paying, soliciting, or receiving remuneration to induce or reward referrals of patients or business covered by federal healthcare programs. Accordingly, physician-owned ASCs that treat beneficiaries of federal healthcare programs, including Medicare and Medicaid, are subject to scrutiny, as a physician’s return on investment could be construed as an improper inducement to generate patient referrals. Violations can result in fines, imprisonment, exclusion from federal programs, and treble damages. 

Such arrangements may be permissible if they satisfy the conditions of relevant safe harbor provisions, which provide protection for certain physician-owned ASCs and hospital-physician ASC joint ventures. Safe harbor protection applies only when all statutory requirements are strictly met. The absence of safe harbor does not automatically render the arrangement unlawful, but may increase regulatory scrutiny.

Staying In Compliance With the Stark/Anti-Kickback Laws

To remain in compliance, providers should implement comprehensive compliance programs that include: 

• detailed policies and procedures for all financial relationships and referral arrangements
• regular training for physicians, executives, and staff on compliance requirements
• routine audits of ownership interests, compensation arrangements, and contractual agreements
• robust documentation practices to demonstrate adherence to statutory exceptions and safe harbor provisions

Physicians and ASC operators should carefully evaluate any investment, joint venture, or remuneration arrangement to determine whether it falls within an existing safe harbor or exception, such as those protecting certain physician-owned ASCs or hospital-physician joint ventures. Consultation with a knowledgeable healthcare law attorney can provide assurance about whether a safe harbor or exception applies.

Maintaining transparent documentation, establishing fair-market-value compensation structures, and seeking legal guidance can help to mitigate regulatory risk. By actively monitoring financial relationships and referral patterns, organizations can ensure compliance with both the Stark Law and the Anti-Kickback Statute, while also safeguarding patient care decisions from undue influence.

Contact a Knowledgeable Healthcare Law Attorney 

Compliance with the Stark Law and Anti-Kickback Statute remains a critical consideration for all medical practice owners, including ASC owners, as noncompliance can carry significant financial and legal consequences. ASC owners must carefully navigate ownership structures, compensation arrangements, and referral practices to stay in compliance. Having a knowledgeable healthcare law attorney who understands the nuances of ASC ownership, as well as the Stark Law and Anti-Kickback Statute, can help alleviate concerns about potentially violating these laws.