The Ethics in Patient Referrals Act (commonly known as the federal Stark Law) prohibits physicians from referring an individual for a Medicare covered service to an entity in which the physician has a financial relationship if the service is a designated health service unless an exception applies. Two such exceptions are the nonmonetary compensation and medical staff incidental benefits exceptions. First, hospitals may provide non cash compensation to physicians; up to an aggregate amount of $355 in 2009. Second, hospitals may provide incidental benefits such as meals and parking to medical staff members who are onsite providing medical care or hospital services, provided such incidental benefits are less than $30 per occurrence.

The yearly $355 nonmonetary compensation exception is applicable only if the benefit is not determined by taking into account the volume or value of referrals or other business generated by the physician, and is not solicited by the physician or his or her practice. In addition, a hospital may have one formal medical staff appreciation event per year for the entire medical staff, and the cost of this event will not be considered part of the $355 non cash benefit allowance.  However, any gifts or gratuities provided therewith (i.e., awards) are subject to the $355 limit. Note that payment of non cash compensation may implicate the Anti-Kickback Statute and other federal or state laws or regulations governing billing or claims submission, requiring a separate analysis under such statutes and regulations.

Incidental benefits provided to physicians while onsite making rounds or engaging in onsite activities benefiting the hospital or its patients (.e.g., lunch in the medical staff lounge) must be: (1) offered to all members of the medical staff practicing in the same specialty; (2) must be reasonably related to the provision of or designed to facilitate the delivery of medical services at the hospital; and, (3) less than $30 per occurrence in value. The benefit provided cannot take into account the value or volume of referrals and cannot otherwise violate the Anti-Kickback Act or federal or state laws governing billing or claims submission. It should also be noted that identification of physicians on a hospital website or through advertising, or the provision of hospital pagers or two way radios meets the “on campus” requirements as long as the other requirements of the incidental benefit rule under Stark are met. In addition, other facilities and healthcare clinics that have bona fide medical staffs may provide benefits under the incidental benefit exception on the same terms and conditions that apply to hospitals.

For further information, please contact Roy M. Bossen or your regular Hinshaw attorney.

This alert has been prepared by Hinshaw & Culbertson LLP to provide information on recent legal developments of interest to our readers. It is not intended to provide legal advice for a specific situation or to create an attorney-client relationship.