Several recent U.S. District Court opinions have challenged the health care industry`s longstanding belief that the Stark Act only applies to claims for items and services reimbursed by Medicare, not those that can be reimbursed by Medicaid. Noting the differences in coverage and reimbursement between the Medicare and Medicaid programs, CMS explained that Congress “wants to give [the agency] some flexibility in applying Medicare rules for physician referrals in the Medicaid context.” However, the proposed rule to implement Section 1903(s) was never finalized, so providers and other stakeholders have limited guidance on how the Stark Act applies to Medicaid claims. In the ongoing FCA cases discussed below, whistleblowers and the government argue that filing claims based on banned remittances from Medicaid recipients may form the basis for actionable FCA claims. Unless the courts decide otherwise, such allegations may require a shift in thinking that Stark is just a matter of medicare. For example, unless there is one exception, a general practitioner cannot refer patients to his wife`s specialized office. Similarly, an orthopedic surgeon who owns an X-ray company cannot send his patients to his own radiology facility, with some exceptions. In United States ex rel Baklid-Kunz v. Halifax Medical Center, the rapporteur alleged that the hospital had financial relationships with treating physicians that violated the Stark Act and that, therefore, the hospital`s filing of Medicare and Medicaid claims as a result of such tainted referrals violated the FCA.4 In particular, the United States intervened in the case and filed a complaint in the intervention, which explicitly stated that “the Stark Act also applies to Medicaid claims. and federal funds cannot be used to pay for certain health services through a state Medicaid program. 5 In response, the hospital argued that Medicaid claims filed as a result of such referrals did not violate the Stark Act because, under Medicaid, providers would be reimbursed by the state, not the federal government. Therefore, the hospital argued, “Even assuming improper claims were made to Medicaid in this case, neither the Stark Amendment nor the Medicaid Act prohibited resulting reimbursement payments to Florida State defendants, and therefore there could not have been a violation of the FCA.” 6 The Stark Act applies to remittances of the following types of DHS paid under the Medicare or Medicaid programs: Despite the clear wording of the Stark Act and its implementing provisions, which state that the Stark Act applies only to Medicare claims, several courts have ruled that the Stark Act applies to Medicaid claims. This new interpretation of the Stark Act creates potential liability for Medicaid providers, as well as potential liability for providers who serve both Medicare and Medicaid patients for violations of the Stark Act.
This article discusses the intersection between the Stark Act and Medicaid, including recent court notices indicating that the Stark Act applies to Medicaid claims. While the decisions in Halifax, Citizens Medical and All Children`s that Stark applies to Medicaid Section 1903(s) claims were made in the context of procedural issues, it remains to be seen what impact these decisions will have on the FCA`s future jurisdiction. Providers such as children`s hospitals, which have not traditionally focused on Stark compliance, should carefully review their financial relationships with referring physicians to ensure they comply with the Stark Act. The rulings also increase the chances that Relators and the DOJ will file FCA lawsuits against Medicaid providers, based on the theory that providers filed false Medicaid claims based on referrals that violate the Stark Act. In 1998, the Health Care Financing Administration (the predecessor of the Centers for Medicare and Medicaid Services) issued a proposed rule that addresses how the Stark Act interacts with Section 1903(s), as it does for Medicaid remittances. In the proposed rule, CMS explained that the Stark Act rules, which prohibit certain remittances, do not apply to providers “if the transfer involves Medicaid services.” Instead, CMS proposed to interpret Section 1903(s) to prohibit the federal government from making FFP payments to a state Medicaid program for DHS that resulted from a referral that would have violated Stark “if Medicare had covered services in the same manner as [Medicaid]” (emphasis in original). CMS further stated that Medicaid providers “are not precluded from referring or billing Medicaid patients for [DHS],” and that a state can pay providers for such claims. According to CMS, Section 1903(s) was “strictly an FFP provision,” such that the federal government would be required to consider the Medicaid application as if it were under Medicare, and if the referral resulted in the denial of payment under Medicare, the federal government would withhold FFP payments from the state`s Medicaid program. In other words, providers would not be violating the FCA by filing heavily tainted claims with a federal Medicaid program; Rather, the federal government would be prohibited from making FFP payments to the Medicaid program for such claims. In Schubert v. All Children`s Health System, a tam rapporteur alleged that All Children`s violated the FCA by establishing financial relationships with doctors who had violated the Stark Act and filing claims with the Florida Medicaid program based on recommendations from those doctors.
All Children`s cited the Stark Act, its regulations and the proposed 1998 rule to argue that the court should dismiss the allegations because the law does not apply to Medicaid claims.