Stark’s law, corporate safe-harbor in contradiction of impartiality to physician decree

16 min read

Bribery and its formalized version; the kickback practice under the current definition is undoubtedly among the most unethical live out ever been committed by humankind. It will probably stay that way for generations to come. Besides, its legality will be the subjects of controversies between those condemn its rationale in one way or another. In the impartial and organized ecosphere, the deed of giving or receiving no matter what of value in exchange for some form of impact or exploit is unreservedly unethical. In the majority of the circumstances is also deemed illicit. Yet, the criminality is somehow subject to large variance from one society to another. The bribery along with its formally conveyed foil- the kickback or warrant has invariably applied to give, offering or soliciting any service or item in exchange for something prized, such as monetary recompense. The Bribery is defined by Black’s Law Dictionary as “The public to influence the actions of an official or another person responsible for a public or legal duty”. Like other defining points in the modern vocabulary, kickback and bribery also carry their peculiar legitimized versions of interpretations.dextrose hanging on stainless steel IV stand

Despite mixed sentiments of the public opinion, some arrangements are defined to be perceptually legal where others punishable to the extreme. At the other end of the spectrum, some actions may be unarguably legit, yet painstakingly unethical enough to be outlined as illegal. Such intended maleficence fall potentially under a multiplicity of delineations, including, but not limited to Annates, Anti-competitive practices, Baksheesh, Bid rigging, Charbonneau Commission, Conflict of interest, Fraud, Kickbacks, Tangentopoli. Very nearly in every circumstance the extortionate has, in one way or another, been able to vindicate his or her actions, with the foremost variance that some have the power to with authorization sway those defining facts; while others with the lower hands may well miss the mark despite having a benevolent objective. The processes of Legitimizing the immoral, legalizing the unscrupulous and illegalizing the right are the ways to hypocritically delineate veracious from immoral. It’s imperative to realize back in the history, not every accomplishment on some sort of financial favoritism to gain lead has been perpetually reflected as an illegal activity and to the same magnitude, and by no means has righteousness been without the unjustified label associated with an act of bribery at all times. For an action to be reflected fraudulent under the act of Subornation, two or more persons (two but third intermediaries or kickback brokers) must partake. As a direct upshot of their action, the recipient of the enticement or the beneficiary must receive something of value sovereign of the overhaul provided. Almost every single industry has its stake of bad apples that entertain some form of fraudulent sweeteners. Similarly, the healthcare industry is not immune to such practice.

The concept of anti-kickback and stark law

The Federal Anti-Kickback Statute (AKS) is one of the well-known federal fraud and abuse bills in the United States. It’s Down to the wide-ranging conflict of interest corruption has on business relationships in the patient care, pharmaceutical, and medical device sectors. The AKS is a criminal edict that prohibits contacts envisioned to encourage or reward referrals for items or services reimbursed under federal healthcare programs. The Stark Law (“Stark”) is another comparable legislative action put in place by a federal government that prohibits self-referral of patients by the treating physicians those of certain services that are reimbursable by Medicare or Medicaid. Such amenities also denoted as designated health services (“DHS”) by entities that the physicians or their immediate family members have a fiscal rapport with. In short, three main concepts of Stark’s ban on physician self-referral include- physician referral; DHS; and financial interest. Theoretically, all three concepts must be implicated in order for Stark to apply to a given circumstance. Thus, Stark is also known as a strict liability law. It means that the party intending to violate the law is not considered lawfully accountable until the government determines whether a violation has occurred. As a result, understanding of whether Stark is drawn in an arrangement involving a physician is an essential element. Stark law is a technical decree, as it applies differently to diverse fact arrays.

Healthcare vs other industries

Bribery in medicine is exponentially critical when paralleled to other industries. Merely because its covenants with the issues of human life, trust between the patient and the doctor, as well as the sacred bond solely built to protect the most important asset of a person called health. Wellbeing is valuable and the quality upholding such value is profoundly sustained by the individual values entertained by the two parties. Thus, the Act of subornation is a destructive element of norms and value of care. Even so,- does it mean all the rules that directly or indirectly prohibit the business part of medical practice are necessary to stop a few bad apples from giving a bad label to the whole stock?! To delineate intentional fraudulent extortion from innocent referral to a system that physician has a financial interest on are two different spectacles. Even so, consequences of across the board application of Stark’s law are overwhelming, one may disagree with my later assumption based on the presumption that “the parties who intend to violate the law are not considered unlawful while the government defines whether a violation has occurred”. Yet, In spite of licit reasoning, such a gray zone in the system would spare the privilege of innocence at limbo. The upshot of the stark law enforcement in the eyes of the government, as who should be punished is the prevailing cause of barring referral all together by physicians.

Stark law and value based reimbursement.

Anti-kickback and the Starks law can be applicable conveniently to any fee for service reimbursement system. Later holds a fixed value with less variability. In contrast value-based reimbursement is more composite, as it relies primarily on engaging individual patients unswervingly with their care, and incorporates personal as well as social determinants of health and sickness. Hence, Merit based compensation within the existing law’s perspective that forbids referral to facilities that may have better transparency to the referring physician or self-referral will open new doors for conflict of interest imposing added burden on independent physician healthcare professionals.

How does value play in Starks law?

We all need to concur that value is the measure of the quality of any service conveyed, which in turn is converted into a tangible item or thing to be traded for another thing or service with poles apart proportions. We can also all agree- for an action to be considered as kickback or bribery, a person or an entity must be a financier of a valuable item and another recipient of the imbursement. If something of value is a form of monetary compensation, then it would be imperative to differentiate win over from typical marketing and recommendation. Most of us can agree to the fact; what makes marketing and promotion different is the legal statute of physician referral, DHS and financial interest surrounding the Medicare and Medicaid programs. Meaning that- even if there was no direct 3rd party reward existed during the referral process, in the eyes of the law still crime would be considered to have been committed. Hence, when we contemplate a valuable reward; such value is merely referred to the repayment for the services rendered. Having said, if referral of a patient to a facility that physician has an economic interest in was intended solely for delivering quality care; still by law would be reckoned criminal. That setup and scenarios alike are in clear conflict with the concept of value-based reimbursement unless that price established is the imitation plagiaristic of some theoretical formulation. The Concept of Quality Measures in Healthcare hosts the good, the bad and the ugliness that would be handed sorted out through transparency and accountability. It ultimately derives from the unique encounter between a patient and a physician.

Self-referral and physician’s clinical judgment

Self-referral in the medical field stereotypically defines the referral of a patient to a medical facility by a doctor, who has a financial actuation within that establishment. The American medical association (AMA) is one the organizations that reached out to lawmakers to pass a conflict-of-interest law preventing doctors from profiting from the route of referring patients to such facilities, even if there was no more reward anticipated by anyone other than the actual value of services rendered. At a short glimpse, the intention may seem to be impartial. But, such a broad-based approach has outright destabilized the integrity of those physicians who have nothing but legitimate objectives. Self-referral for unsubstantiated indication is wrong; nevertheless, if no arguable reason to hold someone accountable for an unbiased professional-quality service provided by a medical group who has a common financial interest. After all, the legitimacy and transparency of the intent matters than the actual action, more so if the patient is aware of what to anticipate.

Designed Health Services and Stark’s law

Designated Health services (DHS) including Clinical laboratory services. Physical therapy, occupational therapy, and outpatient speech-language pathology services, Radiology and certain other imaging services, Radiation therapy services, supplies, Durable medical equipment, medical supplies, Parenteral and enteral nutrients, equipments, Prosthetics, orthotics, and prosthetic devices, Home-health services, Outpatient prescription drugs, Inpatient and outpatient hospital services are considered among those covered under the anti-kickback and stark law. The Rationing is to avert “fraud.” The double standard and vagueness of the policy grow into more obvious when we pay attention to those hospitals and managed care systems that are subsidized under Medicare part C and affordable care act provisions, which has the freedom of executing self-referral by allowing physicians under their umbrella to do the same while prohibiting independent physicians under anti- kickback legislation.

Physician Financial interest

With minor exceptions under the federal jurisdiction, referral of a patient to a facility in which the treating physician has a financial interest is unlawful. I personally find it hard to take on that it’s unethical, forbidden for a physicians to refer their patients to such originations the they’re fiscally affiliated with, even if the particular referral potentially would ensure quality of care and optimal service in accordance with the value-based reimbursement model. I have no hesitation that under the self-referral, DHS and financial interest physician accountability can be seamlessly enforced without prejudgment of off-putting alternatives to deliver a top-notch amenity to the patients.

Ethics and medical practice

Kickbacks and rewarded appointments are primarily veiled markups on a product or service. If not disclosed, they have the potential of violating trust between referring physician and the patient. Concealed doesn’t always stay unnoticed; and when leaked out, what will patients the impression will be of the physician they previously thought of as working at their best interests at heart will crumble to pieces. So; what is wrong by being transparent?! After all- the aftermath and the quality of care is what amounts to under the value-based care system!

Physician-Owned Hospitals – Centers for Medicare & Medicaid Service

Signed into law by President Obama Section 6001 of the Affordable Care Act in 2010, amended section 1877 of the Social Security Act aimed to impose additional requirements for physician-owned hospitals to qualify for the whole hospital but with rural provider exceptions. Since then; the law prohibits physician-held hospitals from expanding facility capacity. Even then the physician-owned hospital that qualifies as an applicable hospital, high Medicaid facility or under-served services may ask for an exemption to the prohibition from the Secretary. The ‘imperative is to acknowledge the hypocrisy of that law by virtue of the concept that self-referral is illegal under federal statute in one case, but legal in another; even if it intended to serve as humanitarian effort. That means one thing; and one thing at most- independent physician’s sovereignty is vital to the underserved communities; more so to rural healthcare. Nevertheless, would leaving loopholes in the principle is the way to go?! American medical association (AMA) was established to protect physician’s interest in conjunction with community health and safety. Meanwhile, it was too one of the first agencies in the medical arena that antagonistically lobbied for one of the most degrading policies in the physician’s history explicitly anti-referral law. For something could have been simply addressed through appropriate transparency and accountability provision.

Pharmacy sales representatives (PSR) and concept of gifts

It has been postulated many times that the Physician–pharmaceutical industry; its sales representative’s interactions and acceptance of gifts from the company’s PSRs have affected physicians’ prescribing behavior, hence are to contribute to unfounded prescribing of drugs. The attitude led to tightening regulations about of these interactions. Even though I do not necessarily disagree that some doctors may be or Influenced by gifting, free luncheon or dinner sponsorship by a specific pharmaceutical marketing campaign, still the circumstances are the ones pointing the outcome; and not the actual transparent and disclosed intentionality of such feat. If in any way, the broad judgment of sponsorship translates into some form of bribery, then the follow-up query should be to elaborate on the circumstances or procedures on how managed care systems and societies choose to handpick a particular drug in their covered list formularies. If explore further one would be enlightened on how a comparable decisions makes the physicians less reliable and credible while giving the contrasting prestige to non-clinical corporations with overwhelming prejudice. Pharmacy representatives sponsoring a drug compete with another brand from a different company with alike clinical indications to treat a medical problem.four people inside mart

If prescribing one brand over another will not cause patient harm, then it would be premature and unsubstantiated to punish physicians for prescribing one brand of medication as a substitute of another one with like efficiency and side effects; Especially while pharmaceutical companies are permitted to promote the same brand of medicines to be public by emphasizing them with “ask your doctor if the particular drug is right for you.” Observing from different prospective, financial interest is exactly how drug formularies are selected by the insurance companies, making it no less or more unprincipled than physician decide on it for their patients.” Gifting physician” is the vulgar way of legitimizing war against the independent physician reign, as in the medical profession, a gift is merely irrelevant. Gift is a personal favor and in the medical world is recognized as unethical; yet by no means it implies to a transparent honest business facets of the medical profession, intended to be patient centered. It is the law or is the right thing to do. That is the question. Wrong is always off beam; if is not following what is morally veracious or worthy for a particular era and place. It coincides with some form of hidden motive. Incorrect is neither always unlawful, nor good deeds are recognized as legal at all times. What renders self-referral as illicit or unethical is by the merits of its effort; be it transparent or covert.

Historical fight against kickback

Extortion, bribery and kickback are considered serious offenses punishable under laws. They’re committed in ranks within any organization, from government at local to international networks. No one is immune from the malicious outcome of its deception. A myriad of distinctive nature and severity between bribery and extortion spectrum, still none seems to have been defined in a way that would allow sustained analysis. Some of the beliefs are widely held by the general public and by academics, but they collapse when applied to particular situations .It gets even more complex when some try to unfairly categorize physician interest in certain business entities within the same spectrum as extortion.

Some of the famous kickbacks

One of the historically known cases of all is the Watergate scandal; as the affair began with the arrest of five men for breaking into the Democratic National committee headquarters at the Watergate complex on Saturday, June 17, 1972. The FBI investigation of Watergate led to discovery of a connection between cash found on the burglars, and a slush fund used by the Committee for the Re-Election of the President (CRP), the official organization of Nixon’s campaign.

The Department of Justice (DOJ) collected more than $2.5 billion in judgments and settlements related to healthcare fraud and false claims in 2018. On another case, Sutter, DOJ squared off in court about the appropriateness of risk scores for Medicare Advantage beneficiaries for violating the False Claims Act for assigning inaccurate risk scores to its Medicare Advantage beneficiaries. Another example; what is now considered illegal, once endorsed film studios to control what audiences saw by renting the exhibition rights to their films in a block. Meaning- if a theater wanted to show an upcoming Blockbuster, they had to pay for less promising “B movies” and short films, too.

 In a recent jury trial on 2019 federal district court in Texas In United States v. Michael Alan Beauchamp, et al., case a jury found seven of nine defendants affiliated with Forest Park Medical Center in Dallas guilty of criminal charges, including violations of the Travel Act which is a 1960s federal ruling initially passed into the law to federalized state criminal law violations in the context of organized crime. This expansion of Travel act into medical domain had major nationwide implications for existing and future marketing arrangements between medical facilities and doctors medical marketing arrangements. The upending of the travel act in this case means- because a bribery act is not enforceable in the state or local jurisdiction does not unavoidably get the offender off the hook.

On January 31, 2019 the Department of Health and Human Services (HHS) and the HHS Office of Inspector General (OIG) issued a proposed regulation that would have subjected certain pharmaceutical manufacturer rebates paid to pharmacy benefit managers (PBMs) to criminal and civil penalties under the Federal Anti-Kickback Statute (AKS). Something that originality enjoyed the protection under the “safe harbor” regulations. The safe harbor act by definition involves payment and business practices that although potentially implicate the Federal anti-kickback statute, are not treated as offenses under the said provision. However, in July 2019, The Trump Administration decided against finalizing a proposed regulation.

What if?

What if Selective safe harbor did not exist, or how we define right and wrong would be weighed in the most elemental statue of its application without categorizing the action of someone on “just because.”

For instance, holding physician in contempt for shrewdly unfair, non-transparent and nondisclosure of information to patient or government that it will cause harm; and thus avoid criminalizing the promotion and exhibiting what it implies to as quality skills saving lives and make people stay healthy.

What if rules were simplified devoid of undue loopholes carrying substantial costs penetrable by rich and the powerful? -That over regulations is not one-sided but also aimed to subject physicians to the risk of falling into the twilight zone of confusion, mistake and desperation. Passing biased laws bear a resemblance to granting safe harbor to legal counsel to profiteer from the physician’s endeavor that are seeking to market their practice; an enactment that resembles a hidden self-referral agenda.

As of today a hand full of managed care organizations provide all-inclusive medical services, facilities, laboratories, pharmacies and other services. Among them are the Participants of affordable care act (like covered California) and Medicare part C plan government subsidized federally funded program members. What if- under the covered California plans a patient pays no copay or deductible for the initial and following annual physical checkups? – Nevertheless, he or she must pay co-pay for tests ordered during the follow-up visits and those ordered by the wellness program to which patient was referred to within the managed care system. Such Scheme of referral would incentivize the system not to order certain tests during an annual checkup, instead to be ordered at the auxiliary visit for extra dough. Such organization would be obviously breaching the anti-trust law through a clear, but fine path of the self-referral arrangement that for some it may appear as an innocent collaborative care. For example, if ordering a “lipid panel” that could have come with no additional cost if ordered during the yearly visit can be skipped to be requested by the referrer. And so, become subjected to be hefty co-pays and deductibles in a plan that has already been paid for by the taxpayers for a service that is performed by a facility that referrer has a financial interest. And yes! Such set-up is happening out there and tends to follow patterns that don’t order follow-up tests on yearly checkup.person walking on hallway in blue scrub suit near incubator

Earlier in this piece, I mentioned the significance of quality and value in medical service. I also elaborated on the conflict with the application of the anti-kickback statute. This leads us to my next point- something that caught my attention not long ago. On a recent blog publication in modern healthcare stated that HHS planning was to unveil a long-awaited proposal to change enforcement of anti-kickback laws. Its focus has been predominantly suggesting value-based payments, and coordinated care should not fall under the Stark law’s purview. According to Center for Medicare Services (CMS) and HHS’ Office of Inspector General, the kickback protections “unnecessarily limits” the coordinated care, and the necessary changes are compulsory to isolate fraud rather than inhibiting data-sharing among physicians who would in turn facilitate “better patient care.” Interestingly enough, retrospectively this dictum leads us back to my original subject that- unsubstantiated overindulgent regulations would not at all times ensure quality healthcare delivery, but will add more flame to the already relentless physician burnout and will criminalize the innocent intentions of those physician judgments. Nevertheless, despite constructive efforts from HHS to reestablish the pathway to the true value of medical services, still their determinations would fall short if the agencies fail to appreciate the candid definition of the value in the healthcare arena. In contrast to what is today being defined as “merit based reimbursement” by largely factoring in social determinants of a patient population along with taking into account certain profile and Algorithmic determinants that are nothing but the product of technical or science-based logic; the genuine value based pay necessitates sole individual, independent mutual encounter between a physician and a patient. The latter to be implemented must factor in apiece patient personal determinant as well as what is crucial within their social environment.

Consequently, placing pointless limits through one size-fits-all policies with the ration of averting fraud, any effort made to maximize quality and value of the care will end up in the botch wastebasket. Hence, Personalization of services invariably relies on the true definition of quality and value. Government intervention is an utter failure by the virtue of excess political loopholes and double standards within the system. Like other bipartisan initiatives within sectors, all sharing a common phenomenon being a failure to define and differentiate fraud, favoritism, self-referral, wrongful intention, extortion and bribery, Leaves too large of gray areas wide-open to be exploited by alternate rich and powerful lobbyists.


Highly controlled environment is prone to corruption. The notion of “laws are meant to be broken” is not necessarily spot-on. What makes more sense in today’s politics is: “laws are made by those who know where the loopholes are and for when it is desirable to be penetrated.” I call it the Controlled (organized) kickback scheme. It sure seems the smartest knows when to make an extortion seem like an act of kindness, as it can be done through planned and executed legal kickback. In the case of Pharmacy benefit managers (PBM) that are consolidated and increasingly vertically integrated industries. They have been empowered in the past by the administration to play an important role as one of the world’s biggest players in the healthcare industry; the pharmaceutical distribution. Even though policymakers are trying to reform the drug rebate system by increasing transparency, it still carries insufficient weight based on the fact that such transparency exposes fragments of the entire process. Logically For successful execution, what is required is the full transparency along the chain of operations accompanied by pinpoint accountability? Anything short would point to alternative objective of easy admission to big data.

The 21st-century gold rush that incentivizes the system to loosen the choker on physicians, the same way they have been able to accomplish by recent endorsement of Screening for Illicit Drug Use , National Institute of Health Collecting Blood, Urine as part of “ All of us program “ campaign. Kickback is unethical and at times illegal. Yet, what makes it punishable must be well-defined under the right state of affairs. In fact, what our society needs is to outline what action is outright hurtful to others, whether is intentional; considered collectively as off beam and even if it doesn’t result in malice. If kept in the grassroots and enforced by observing every step of the process transparent and accountable, solution would be within our reach.

Kickback has become a broadly demonized term for acts that can be profiles under marketing, favoritism, discrimination, extortion and even fraud. All above can be destructive, (some more in severity than the others) hence the prevention lives within each case. By giving the power to patients through full disclosure, and transparency, ensuring fair free access to market to everyone along with depersonalization of corporate entities is necessary to overhaul the fight against fraud and not the good physicians. Quality and Value are individual traits. If the patient perceives inducement, it will be revealed on the value of physician’s deliverable. If accepted by patient and outcome was good of then the doctor deserves the credit.

The most important is intention.

There appears to be no conflict, if the legitimate reason justifies referring a patient to a medical business where a referring doctor has a professional interest, and such transfer is in line with the well-being of the patient. No logical explanation reasons for commissioned pay in exchange for referral process in the value-based reimbursement model. That is irrelevant due to the fact that fiscal directive is not a value-based model. HHS’s refurbishment of Stark law rules to protect coordinated care is the clear gauge of where the agency is coming from; yet, whether enough carries the controversy of its own.

Then how about PBM?! – are they more powerful than physicians or holds stronger consolidating structure than American medical association representing the physicians? How about Managed care organizations, and their meticulously executed self-referral programs?! Latter has the full federal support, while independent physicians are prohibited doing the same and if broken punishable with imprisonment. Or, – is the Problem the personification of corporations?! Physicians are the trailing party in the battle of hypocrisy, politics, corporate reigning and lobbyism. In a country where the government is constitutionally by the people and for the people, direct government participation at the business negotiation table with private entities is a matter of discrete deliberation. The factor behind ambiguities that allow certain acts of bribery to be considered legal lies within the assumed definitions. That must change to the benefit of intent. By the same distinction concept of devaluing physicians, responsibility has turned into the instrument of control over their sovereignty by the hands of the covert watchdogs, Weakening physicians, Scheming their domain, creating escapes to rerun to whenever necessary. A doctor’s referral to facilities they have an interest in is not inevitably disparaging as long as expectations, Transparency, Accountability is outlined and recognized ahead of time. The Outcome is what counts and thus the ultimate value. The Secret to resolution is profoundly easy, but logistically challenging given the legalized system of monopoly and kickback practice that has over the past centuries have selectively favored a group of elite folks over individual reign and entities over them all.

Adam Tabriz, MD Dr. Adam Tabriz is an Executive level physician, writer, personalized healthcare system advocate, and entrepreneur with 15+ years of success performing surgery, treating patients, and creating innovative solutions for independent healthcare providers. He provides critically needed remote care access to underserved populations in the Healthcare Beyond Borders initiative. His mission is to create a highly effective business model that alleviates the economic and legislative burden of independent practitioners, empowers patients, and creates ease of access to medical services for everyone. He believes in Achieving performance excellence by leveraging medical expertise and modern-day technology.

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