The Center for Medicare and Medicaid Services issued its Voluntary Self-Referral Disclosure Protocol (“SRDP”) on September 23, 2010. I outlined the problems with the SRDP and summarized the guidance provided by CMS representatives for making a submission in prior posts. The purpose of the SRDP is to self-report that an entity received payments from Medicare in violation of the Stark statute.

One issue that an entity making a self-disclosure will encounter is how far back it should go when determining the period of non-compliance. The Stark law was first effective in 1989, and initially prohibited physicians from making referrals for clinical laboratory services. This is commonly referred to as Stark I. The list of designated health services was expanded to ten (now 12) in 1993. This is commonly referred to as Stark II. Stark II was effective January 1, 1995, but the Stark II, Phase I regulations were not effective until January 4, 2002. Thus, from January 1, 1995 to January 4, 2002, the only legal basis for prohibiting claims for designated health services other than clinical laboratory services is the statute itself.

An argument can be made that the earliest date for reporting that a claim was submitted to Medicare in violation of Stark II is January 4, 2002. Prior to that date, although the statute was in effect, the obligation in 42 C.F.R. §411.353(d) to refund any payments made by Medicare pursuant to a prohibited referral did not apply to the other designated health services, including hospital inpatient and outpatient services. This obligation is not found in the statute, which requires that providers make refunds to individuals on a timely basis. CMS acknowledges in the SRDP that this obligation is distinct from the obligation to refund payments made by Medicare and cannot be compromised.

Keep in mind also that payments made to physician groups (a professional corporation or limited liability company) would not constitute a financial relationship with the individual referring physicians in the group unless the arrangement met the definition of an indirect compensation arrangement prior to the Stark II, Phase III regulations implementing the “stand-in-the shoes” rule.

Therefore, if the financial relationship was between the entity and a physician group and the referring physicians in the group did not receive compensation from the group that varied with the volume or value of referrals to the entity, the earliest date of the potential disallowance period would be December 4, 2007, which is the effective date of the Stark II, Phase III regulations.

As originally proposed, any physician in the group would stand in the shoes of his or her group. The stand-in-the shoes rule was later modified effective October 1, 2008 so that only physicians who have an ownership or investment interest in the physician group would stand in the shoes of the group, and other physicians may stand in the shoes.

It would make sense for CMS to apply the stand-in-shoes rules only to the owners of the physician group as of December 4, 2007, and not require that all physicians who were employees or independent contractors in the group between December 4, 2007 and October 1, 2008 stand in the shoes of the group. Determining which physicians had employment or independent contractor arrangements with a particular group could be burdensome, whereas information regarding the owners of a physician group is publicly available, at least in New York.