financial arrangements

Today I am focusing on the self-referral ban under the federal Stark laws. In particular, a recent case – Fresenius Medical Care Holdings, Inc. v. Tucker (Dkt. No. 4:03-cv-00411-SPM-GRJ (Jan. 10, 2013, 11th Cir.)) – discussed the interplay between those laws and a State’s attempt to impose more stringent requirements. 

The court first focused on two exceptions to the Stark laws’ ban on physician self-referrals. These exemptions concern clinical lab services for end-stage renal disease (ESRD), as well as certain lab services performed by a company with stockholder equity in excess of $75 million. 

A Florida statute subsequently narrowed these exemptions, and that statutory change impacted a Florida business’ ability to make referrals. 

The plaintiff argued that Congress had crafted the Stark laws’ exemptions in order to benefit Medicare and Medicaid recipients and, as such, intended to provided explicit benefits. That argument was rejected. 

The circuit court found that federal law permitted State laws to be more stringent, and that this was such a situation. Moreover, the court was not convinced that the plaintiff’s business was stifled by the State rules and, instead, found that the impact to the business was marginal. 

It remains to be seen whether or not this ruling will encourage States to enact more stringent restrictions and make it even more difficult for businesses to comply with a non-uniform set of rules.

Physician/Medical Device financial arrangements continue to draw scrutiny by regulators. According to an article in the New York Times, Senator Charles Grassley has instituted an inquiry into payments between device-maker Medtronic and Dr. David Polly that Grassley says were not disclosed by Dr. Polly when he testified before Senate Panel in 2006. Specifically, Dr. Polly allegedly failed to disclose during his testimony that Medtronic was paying him $6,000 for his appearance before the committee.

Although the amount not disclosed is small, documents released by Senator Grassley show that between 2003 and 2007, Medtronic paid Dr. Polly in excess of $1.14 million in consulting fees and expenses from Medtronic. The lesson for physicians: As medical costs and quality emerge as the buzzwords for health care reform, financial arrangements which create or which give the appearance of conflicts of interest are increasingly likely to come under scrutiny by regulators and enforcement authorities. Physician contemplating these arrangements must carefully evaluate the benefit of the arrangements and the potential pitfalls.