Moving the HME Industry Forward

General Healthcare

Interplay Between Stark and the Kickback Statute

Jeffrey S. Baird, JD • March 31, 2018

AMARILLO, TX – The Federal Anti-Kickback Statute (AKS) prohibits knowingly and willingly offering, paying, soliciting, or receiving, directly or indirectly, anything of value if the purpose is to induce the recipient to refer, order, recommend, or purchase an item or service for which payment may be made under a federal health program…or to arrange for someone else to do so. Any person (or any entity) can be a referral source: physician, nurse, PT, marketing company, kindergarten teacher, etc. Because of the breadth of the AKS, the Office of Inspector General (“OIG”) has published a number of “safe harbors.” If an arrangement complies with a safe harbor, then as a matter of law the arrangement does not violate the AKS. If an arrangement does not comply with a safe harbor, then it does not mean that the arrangement automatically violates the AKS; rather, it means that the parties to the arrangement will need to closely examine the arrangement in light of the language of the AKS, court decisions, and other published guidance.

The Federal Stark Physician Self-Referral Statute (Stark) prohibits physicians from referring Medicare/Medicaid patients to a provider in which the physician has a financial (ownership or compensation) relationship for the furnishing of “designated health services.” Designated health services include DME, outpatient prescription drugs, and parental and enteral nutrition, among others. There are a number of exceptions to Stark, including the nonmonetary compensation exception (NCE). The NCE allows the DME supplier to provide gifts to a physician so long as all of the gifts in a calendar year do not exceed a certain dollar amount in value. For 2018, the dollar amount is $407. Each calendar year, the dollar amount is adjusted to take inflation into account. If a physician is in a multi-physician group, then in 2018 the provider can spend up to $407 per physician.

When a DME supplier provides meals and other gifts to physicians and their employees, it is important to note that (i) Stark only applies to the physicians…not to their employees and (ii) the AKS applies to both the physicians and their employees.

Thus, when dealing with the physician, both statutes must be satisfied. When dealing with the physician’s employees, only the AKS must be satisfied. There is not an NCE to the AKS. Technically, this means that the supplier can spend $407 in 2018 on the physician and satisfy Stark…but still violate the AKS. However, if the NCE is satisfied, then it is highly unlikely that the government will assert a violation of the AKS.

As previously mentioned, only the AKS applies to the employees. The AKS does not contain the NCE. Therefore, what can be spent on the employees? This is where the supplier must be reasonable. In my Constitutional Law class in law school, I learned that the definition of pornography is “you know it when you see it.” The same concept can be applied to gifts to a physician’s employees: “You know a kickback when you see it.” The supplier cannot spend so much money on employees that it looks like the supplier is trying to take away the independent judgment of the employees. The more that the supplier spends on employees, the more the kickback risk increases. Conversely, the less that the supplier spends on employees, the more the kickback risk decreases.

Let’s look at an example. Assume that the supplier puts on a training luncheon for the physician and his employees. Assume that the physician attends the luncheon. Assume that the amount of money attributable to whatever it is that the physician eats is $10. Assuming that the supplier has thus far spent nothing else on the physician, then the supplier can spend $397 for the physician for the balance of 2018. Assume that the amount of money attributable to whatever it is that each employee eats is $10. That is a reasonable amount. If, for example, the supplier wants to sponsor similar lunches three other times during the year (a total of four lunches for 2018), then the kickback risk is low. If the supplier sponsors more than four lunches, then the kickback risk increases. Conversely, if the supplier sponsors less than four lunches per year, then the kickback risk decreases.

Jeffrey S. Baird, JD, is chairman of the Health Care Group at Brown & Fortunato, PC, a law firm based in Amarillo, Tex. He represents pharmacies, infusion companies, HME 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

Jeff Baird and Lisa Smith will present the following webinar:


Billing on a Non-assigned Basis

Presented by: Jeffrey S. Baird, Esq., Brown & Fortunato, P.C. & Lisa K. Smith, Esq., Brown & Fortunato, P.C.

Tuesday, April 10, 2018

2:30-3:30 p.m. EASTERN TIME

On June 23, 2016, CMS published the July Fee Schedule for DME suppliers … and it is ugly. The rates encompass the expansion of competitive bid rates to non-CBAs. The cuts range between 45%-59% on common respiratory products, but reach 82% on TENS units and Enteral IV Poles. The bottom line is that Medicare will pay as little as possible for DME. In response, suppliers need to distance themselves from Medicare fee-for-service.

This webinar will discuss ways that the DME supplier can accomplish this. For example, the supplier can elect to be nonparticipating and provide DME on a non-assigned basis. Doing so raises a number of questions. For example:

  1. What does it mean to bill non-assigned?
  2. If the supplier bills an item non-assigned, then can the supplier set the price without limitations?
  3. Can a supplier bill a rental item nonassigned?

Billing non-assigned ties into selling at retail. A DME supplier is engaged in “retail” when it sells an item for cash. The item sold may or may not be covered by Medicare … and the purchaser may or may not be a Medicare beneficiary. This webinar will discuss the legal parameters within which the supplier can engage in retail cash sales.

Register for Billing on a Nonassigned Basis on Tuesday, April 10, 2018, 2:30-3:30 pm ET, with Jeffrey S. Baird, Esq., and Lisa K. Smith, Esq., of Brown & Fortunato, PC.


Member: $99

Non-Member: $129