Hospitals, physicians and other providers evaluating changes to a more integrated system of care need to be aware of the unique risks under the self-referral and antikickback laws largely due to their financial relationships. These risks are exemplified by a recent settlement between the government and Intermountain Health Care Inc. (Intermountain), Utah’s largest health care system.

On April 3, 2013, the U.S. Department of Justice (DOJ) announced that Intermountain agreed to pay the United States approximately $25.5 million to settle accusations that it violated both Section 1877 of the Social Security Act 42 U.S.C. §1395nn and 42 C.F.R. § 411.350 et seq., also known as the physician self-referral law and commonly referred to as the “Stark Law” and the False Claims Act 31 U.S.C. § 3729 et seq. (False Claims Act).

Noncompliance with the Stark Law can result in massive liability, as Intermountain recently discovered. The Stark Law requires actual compliance and as with most strict liability laws, liability under the Stark Law is not based on a parties’ intent. In 2009, Intermountain self-disclosed the following Stark Law violations:

  • Paying bonuses to 37 physicians based on the amount that Intermountain earned from the physicians respective patient referrals (i.e., improperly taking into account the volume and value of the physicians referrals without meeting a Stark Law exception);
  • Providing remuneration to more than 170 physicians without written agreements; and
  • Leasing office space with fair market value issues and without valid written leases.

By way of background, Stark Law prohibits a physician from making referrals for certain designated health services payable by Medicare to an entity with which he or she (or an immediate family member) has a financial relationship (ownership, investment, or compensation), unless an exception applies. Additionally, Stark Law prohibits the entity from presenting or causing to be presented claims to Medicare (or billing another individual, entity, or third-party payer) for those referred services. It is vital to note that Stark Law establishes a number of specific exceptions for finical relationships that do not pose a risk of program or patient abuse.

The size of this settlement indicates the seriousness with which the government will pursue Stark Law violations. The resolution between Intermountain and the DOJ is part of the government’s ongoing emphasis on combatting health care fraud and abuse.