Understanding Stark Law

Hypothetical #1: You are the attorney for Good Asnew hospital. One day, the Compliance Officer for Good Asnew reveals to you that she has discovered the following facts about the hospital’s relationship with various members of the Starkla family: Pete Starkla, a physician, signed a six-month contract with Good Asnew to serve as a part-time medical director on an independent contractor basis. Pete’s contract specified the number of hours the physician was to work each week, and the fixed hourly rate to be paid to him, which the Compliance Officer confirmed was consistent with fair market value and was commercially reasonable.  During the six month term of his medical directorship, Pete routinely referred Medicare patients for inpatient services to Good Asnew.  Like her husband, Petra Starkla is also a physician.  Her only connection to Good Asnew was that sometimes she developed plans of care for Medicare patients admitted to Good Asnew.  Pete and Petra Starkla have a daughter, Patricia Starkla, who was one of five physician- owners of Good Asnew.  She did not refer patients for inpatient or outpatient services, but did periodically refer Medicare patients to Good Asnew’s emergency room for emergency services.  Finally, Patricia’s brother Patrick is the fourth physician in the Starkla family, and had been hired by Good Asnew as a part-time physician employee. Patrick’s employment contract with Good Asnew provided for Patrick to be paid 80 percent of the professional fee that Good Asnew received from Medicare for his services, plus a bonus equivalent to 40 percent of the professional fee for each procedure he performed in excess of 50 each month.  The employment contract further provided that the technical or facility fee portion of the outpatient services would be billed to Medicare by Good Asnew.  The Compliance Officer has again determined that the payments made to Patrick under the contract (including the bonus payment) were fair market value and commercially reasonable. The Compliance Officer now wants to know whether Good Asnew’s relationship with any of the Starklas violated the Stark Law. What is your conclusion and why?

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