Phase I Stark rules set new limits on gift giving

By Elizabeth E. Hogue, Esq.
Burtonsville, MD

Historically, home care agencies have given physicians and/or their immediate family members noncash items that have a relatively low value and are not part of a formal, written agreement. Home care agencies may, for example, provide lunch to physicians and their staff members at their offices. And, in this vein of giving, agency staff have also routinely left items of limited value such as pens, notepads, etc. at physicians’ offices. While seemingly acceptable, agency managers should question whether such items are legally acceptable.

When evaluating this issue, there are two areas of the law that must be considered: The first includes prohibitions against illegal remuneration or kickbacks and rebates, and the second involves provisions of the so-called Stark laws. With respect to the latter, Phase I of the final regulations under the Stark laws was recently published and directly address this issue.

Limited risk with low-value items

Specifically, the regulations indicate that free items of relatively low value are unlikely to cause overutilization, if provided within reasonable limits. The regulations further state that as long as all of the following criteria are met, such nonmonetary compensation will not violate the Stark laws:

The annual aggregate value of nonmonetary gifts to a physician does not exceed $300.

Agencies who provide nonmonetary compensation to physicians make it available to all similarly situated physicians, regardless of whether physicians refer patients to the agency for services.

The compensation is not determined in any way that takes into account the volume or value of a physician’s referrals to the agency.

Under these regulations, it is now clear that agencies that meet these criteria for nonmonetary compensation can avoid violation of the Stark laws. However, that doesn’t mean agencies can give gifts with impunity. Agencies should also be aware of the following limitations:

Protection from violations of the Stark laws is not available for gifts that are solicited by physicians or group practices. The reason for this limitation is to prevent physicians from making such gifts a condition or expectation of doing business. The classic example of solicitation of gifts from agencies may be insistence by physicians that they will only meet with staff to discuss patients receiving services, etc., if agency staff bring lunch with them. Such requirements may amount to solicitation that will preclude protection from agencies that supply lunch under these circumstances.

The exception for nonmonetary compensation up to $300 only protects gifts to individual physicians.

Thus, gifts given to a group practice will not qualify for this exception. Noncash gifts could, however, be given to one member, several individual members, or each member of a group practice, if each such gift meets all of the conditions of the exception for nonmonetary compensation up to $300. The exception does not apply to gifts, such as at holiday parties, or office equipment or supplies that are valued at not more than $300 per physician in the group, but are, in effect, given or used as a group gift.

When agencies comply with the above requirements and avoid these limitations, they may gain protection from allegations that they violated the Stark laws in order to encourage referrals from physicians. Agencies must bear in mind, too, that the federal statute that prohibits illegal remuneration or kickbacks and rebates also applies to the issue of nonmonetary compensation to physicians who make referrals to agencies.

No gifts for referrals

This federal statute generally prohibits anyone from offering to give or actually giving anything to referral sources in order to induce them to make referrals. At least in theory, agencies could comply with the requirements of the Stark laws regarding nonmonetary compensation to physicians but still violate the kickback and rebate statute through their use of nonmonetary gifts to physician referral sources.

At this point, though, it seems unlikely that the Office of the Inspector General of the Department of Health and Human Services, the primary enforcer of fraud and abuse prohibitions, will conclude that agencies provided kickbacks and rebates to physicians if the requirements of the Stark regulations as described above are met. In other words, compliance with the requirements of the new final Stark regulations will probably provide protection to agencies with regard to all nonmonetary compensation provided to physicians.

Agencies should bear in mind, however, that Phase II final regulations under the Stark law will be published in the near future. Stay tuned for more guidance on these issues.

[A complete list of publications is available from Elizabeth E. Hogue’s office. Telephone: (301) 421-0143. Fax: (301) 421-1699.]