This paper examines the legal risks associated with a proposed joint venture between Sundown Community Hospital and Central Park Medical Group, whose patient population is approximately 60% Medicare. Acting as hospital administrator, the author evaluates whether the arrangement satisfies the safe harbor provisions of the Medicaid Anti-Kickback Statute and the exceptions to the Stark Statute. The analysis finds that the proposed venture falls outside all relevant safe harbors and Stark exceptions, and that the strict-liability nature of the Stark Statute creates exposure even without fraudulent intent. The paper concludes with a recommendation to abandon the joint venture and pursue a simpler contractual arrangement that explicitly disclaims any intent to induce referrals or exchange remuneration for Medicare and Medicaid referrals.
A joint venture is proposed between Sundown Community Hospital and Central Park Medical Group, a physician group practice whose patient population consists of approximately 60% Medicare patients. This proposed arrangement requires careful review of the safe harbor provisions of the Medicaid Anti-Kickback Statute and the exceptions to the Stark Statute. In addition, attention must be paid to carefully and clearly wording any contract to state that the parties are not entering the agreement to induce referrals or solicit remuneration in exchange for Medicare and Medicaid referrals.
The board of directors of Sundown Community Hospital has directed me, as head administrator, to enter into a joint venture with Central Park Medical Group. The board has authorized me to offer permanent staff privileges and monthly bonus arrangements to the physician owners. The chief monetary contribution provided by the physician group would consist of the referral of Medicare patients. With respect to the Medicaid Anti-Kickback Statute — which governs criminal liability — and the Stark Statute — which governs civil liability — I am primarily concerned with avoiding violations of either statute. These statutes cover both Medicaid and Medicare, though the Anti-Kickback Statute is criminally oriented and covers all health providers, while the Stark Statute is civil and covers only physicians (Altshuler, Creekpaum, & Fang, 2008).
Because compliance with the Anti-Kickback Statute does not necessarily ensure compliance with the Stark Statute, and vice versa, I must review both statutes to determine whether the proposed arrangement falls within one of the 124 "safe harbors" provided by the Anti-Kickback Statute (Altshuler, Creekpaum, & Fang, 2008) and also within the allowed arrangements of the Stark Statute. Furthermore, even if the arrangement falls within a safe harbor or a Stark exception, the contract establishing the joint venture must clearly state that Sundown Community Hospital, Central Park Medical Group, and any involved owner physicians or staff of either institution are not entering the agreement to induce referrals or solicit remuneration in exchange for Medicare or Medicaid referrals (LexisNexis Academic, 1999).
Because a joint venture is merely "an association of two or more individuals or companies engaged in a solitary business enterprise for profit without actual partnership or incorporation" (Farlex, Inc., 2013), several types of arrangements between providers could potentially qualify as safe harbors. However, upon reviewing the enumerated safe harbors, this proposed arrangement does not satisfy any of them.
First, the two institutions cannot qualify for the "Cooperative Hospital Service Organization" (CHSO) safe harbor under 42 C.F.R. §1001.952(q) because Central Park Medical Group is not a hospital (Altshuler, Creekpaum, & Fang, 2008). Second, the arrangement cannot qualify under 42 C.F.R. §1001.952(p) because Sundown Community Hospital is not a physician group (Altshuler, Creekpaum, & Fang, 2008). Third, the proposed arrangement does not fall within the safe harbor for investments in group practice, because the hospital would not meet the following required criteria: equity interests held by licensed professionals; equity interests being in the entire practice; a unified business with unified decision-making and pooling of financial interests; and revenues from ancillary services coming only from in-office ancillary services (Altshuler, Creekpaum, & Fang, 2008).
Consequently, the proposed arrangement would fall outside of the safe harbor provisions of the Medicaid Anti-Kickback Statute. The analysis must therefore turn to whether the arrangement can satisfy an exception under the Stark Statute.
"Strict liability exposure under the Stark Law"
"Advice to abandon venture and pursue contract"
The proposed joint venture would fall outside of the safe harbor provisions of the Medicaid Anti-Kickback Statute and outside the exceptions to the Stark Statute. Accordingly, I would advise the board to forego the proposed joint venture and instead enter into a contract that does not involve joint ownership or investment interests and that clearly states that the parties are not entering the agreement to induce referrals or to solicit remuneration in exchange for Medicare or Medicaid referrals.
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