Moving the HME Industry Forward


Physicians/Chiropractors Selling O&P – What Stark Says

April 28, 2014

AMARILLO, TX – Orthotics and prosthetics (O&P) can be an important part of a DME supplier’s product mix. The DME supplier’s competitors are not only other DME suppliers, but can also be physicians and chiropractors. Within certain parameters, physicians and chiropractors can provide O&P products and bill Medicare for them.

The federal Stark self-referral statute applies to physicians and chiropractors, among others. Under Stark, if a physician/chiropractor has an ownership interest in an entity (e.g., LLC) then the physician/chiropractor cannot refer patients to the LLC to receive “designated health services” if the patients are covered by a government health care program. DHS includes (i) “Durable medical equipment and supplies” and (ii) “Prosthetics, orthotics, and prosthetic devices and supplies.”

There are a number of exceptions to Stark. One is the “rural provider” exception. Under this exception, if the LLC primarily serves patients residing in a rural area, then the Stark prohibition does not apply. “Primarily means 75% or greater.”

Another exception is the in-office ancillary service exception. Under this exception, a physician/chiropractor can refer patients (covered by a government health care program) to the physician’s/chiropractor’s own practice for DHS so long as the products/services are offered “in office” and the physician/chiropractor supervises the provision of DHS. O & P products fall within this exception. However, DME is expressly excluded from this exception. “In office” includes the building in which the physician/chiropractor has his medical practice. “In office” does not include “in a building across the street,” unless the referring physician/chiropractor is a member of a group practice, and the other building is used for the centralized provision of the group’s DHS.

Here is what all of this means:
A) A physician/chiropractor can provide O & P products to patients at his/her medical/chiropractic practice.
B) Let’s say that the physician/chiropractor sets up ABC, LLC, which is wholly-owned by the physician/chiropractor. Assume that ABC only provides O & P products. Assume that ABC is located in the same building where the physician’s/chiropractor’s practice is located. Assume that the ABC employees are supervised by the physician/chiropractor. ABC likely falls under the in-office ancillary services exception. On the other hand, if ABC is located “across the street,” it likely does not fall within the exception.
C) Let’s say that Dr. Jones is a chiropractor and that he owns 100% of ABC. Assume that Dr. Smith is a physician. Assume that Dr. Jones and Dr. Smith are not in a group practice. If Dr. Smith takes an equity interest in ABC, then ABC is likely removed from the in-office ancillary services exception. On the other hand, if Dr. Jones and Dr. Smith are in the same group practice, and if ABC is in the same building that Drs. Jones and Smith have their group practice, or if ABC is located in another building used by the group for the centralized provision of the group’s DHS, then Dr. Smith can have an equity interest in ABC…..and ABC will likely fall within this exception.
D) If Drs. Jones and Smith are not in the same group practice, and if they jointly own ABC, and if ABC does not primarily serve residents of rural areas, then Drs. Jones and Smith cannot refer patients to ABC who are covered by a government health care program. Drs. Jones and Smith can refer patients (not covered by a government health care program) to ABC so long as state law does not prohibit such referrals.

Jeff Baird will be co-presenting a webinar for AAHomecare this week. It focuses on the retail sales market. See information listed below:

AAHomecare’s Educational Webinar

Retail Sales: A Critical Component of the Successful HME Company
Presented by:
Jeffrey S. Baird, Esq., Brown & Fortunato, P.C.
Jack Evans, Global Media Marketing

Tuesday, April 29, 2014
2:30-4:00 p.m. EASTERN TIME
Sign up now for Retail Sales: A Critical Component of the Successful HME Company on Tuesday, April 29, 2014, 2:30-4:00 pm ET, with Jeffrey S. Baird, Esq., of Brown & Fortunato, PC and noted retail and marketing expert Jack Evans, President of Global Media Marketing.

Please note: we have adopted a new online meeting registration system; please contact Ika Sukh at if you experience any difficulties registering.

FEES: Member: $99.00    
Non-Member: $129.00

Jeffrey S. Baird, JD, is chairman of the Health Care Group at Brown & Fortunato PC, a law firm based in Amarillo, Tex. He represents DME suppliers, pharmacies, infusion companies, and other health care providers throughout the United States. Mr. Baird is Board Certified in Health Law by the Texas Board of Legal Specialization and can be reached at (806) 345-6320 or