Professional courtesy, when extended to a physician or entity who refers to "designated health services" can implicate the Stark Law. The Stark Law is a strict liability statute and the penalties for violating the statute can include denial of payment, refund demands, civil monetary penalties, and exclusion from the Medicare program.
The Stark ban on physician self-referral generally makes it unlawful for a physician to refer Medicare patients for radiology tests, clinical laboratory tests, physical or occupational therapy, home health care, or other such "designated health services" to an entity with which the physician has a "financial relationship". A financial relationship can be an ownership or a compensation arrangement with an entity. A compensation arrangement is defined to include any arrangement involving any remuneration between a physician and an entity, including remuneration that is "in cash or kind". The provision of free or discounted services to a provider of "designated health services" or the provider's family would be such prohibited remuneration.
There is, however, an exception to the Stark regulations to allow for a certain extension of professional courtesy. In order to fall within the Stark exception, all of the following elements must be met:
- The professional courtesy must be extended to all members of the entity's medical staff in the case of a hospital, or all members of the local community or service area, in the case of a physician practice
- The healthcare items and services are a type routinely provided by the entity or practice
- The professional courtesy policy must be set forth in writing and approved in advance by the entity's governing board(s)
- The professional courtesy must not be extended to Medicare or other federal health program beneficiaries unless there is a showing of financial need, and
- The arrangement cannot violate the anti-kickback statute or any state law