Establishing a Physical Therapy Department
A solo practitioner practices family medicine in a “strip-type” shopping center. A number of patients have conditions requiring physical therapy and are referred out physical therapists . The physician has found through experience that his patients often do not receive the quality of treatment he envisions, and hence do not improve as he would like. He wants to expand the scope of his practice by offering PT to his patients (many of whom are covered under Medicare), and directly supervising that therapy. To do so he would lease office space in the shopping center one door down and immediately adjacent to his existing office space and put a physical therapist there. Can he do so without violating the “Stark” anti-self- referral law.
The "Stark Law" is important to this question because it does two main things: (1) prohibits a physician from making referrals for certain “Designated Health Services” (“DHS,” including PT, OT, laboratory, x-ray, home health, DME and others) payable by Medicare to an entity with which he (or an immediate family member) has a financial relationship (ownership, investment, or compensation), unless an exception applies. Further it prohibits presentation of claims to Medicare (or billing another individual, entity, or third party payer) for those referred services. In this case , the referral of patients for PT would violate the Stark law, because as strange as it sound, he has a “direct financial relationship” with an entity - his own practice - and would make referrals to that entity for the furnishing of DHS for which Medicare payment may be made. Thus an exception has to be satisfied.
One might object that no “referral” is being made here: the physician simply has his patients receive PT in his own practice. That is incorrect: under the Stark Law a “referral” occurs anytime a physician makes a request for care that includes any DHS for which Medicare payment may be made (such as PT), or establishes a plan of care that includes DHS. Thus it is very easy to have a referral under Stark.
The “In-Office Ancillary Service Exception” would allow this arrangement under certain conditions. The PT must be furnished in the “same building,” but not necessarily in the same space or part of the building, where (1) the physician practices at least 35 hours a week, (2) the patients normally receive their medical care, and (3) services are billed by physician performing or supervising the services (or an independent third-party billing company acting as the physician’s agent). The In-Office Ancillary Service Exception applies to group practices as well, though there are some additional requirements, especially where lab services are concerned.
This is not always as simple as it sounds. The “same building” must be a structure (or combination of structures) sharing a single street address assigned by the U.S. Postal Service. Because the space the physician proposes to lease is immediately adjacent to his existing practice, the ordinary view is that the two office spaces would be in the “same building.” However, if the city assigned different street addresses to different spaces in this strip mall, the single street address condition is not technically met, and Stark is technically violated.
In that case the physician should to ask CMS for an Advisory Opinion before proceeding, and have a competent attorney make that request for him. Though it seems like a small matter, claims that violate the Stark Law are also deemed to violate the Federal False Claims Act, so a small mistake can mean a big penalty.