For 20 years, the CMS has not applied the federal ban on physician conflicts of interest known as the Stark law to Medicaid claims. It's focused on Medicare only.
But private whistle-blowers have begun pressing for clarity on the issue because a 1993 law applying Stark to Medicaid remains on the books and could potentially put millions of dollars in their pockets. Now, the CMS says the law does apply, and the U.S. Justice Department is moving ahead by citing the previously unenforced law in a Florida lawsuit seeking repayment of Medicaid claims for Stark violations.
A spokeswoman confirmed last week in an e-mail to Modern Healthcare that the CMS does consider the Stark law applicable to Medicaid claims, even though it has never published final rules on how it would work.
If the Justice Department's legal strategy holds, children's hospitals may be the most affected because they treat so many Medicaid patients. But any hospital that cares for Medicaid patients could be affected. That may explain why organizations such as the Federation of American Hospitals deny that Stark applies to Medicaid.
Yet some legal experts say it is state governments—not the hospitals or doctors accused of wrongdoing—that may have to foot the bill if providers' Medicaid claims violate the Stark law, because of the odd way that the original 1993 Stark law was written. That could create a sensitive situation at a time when the Obama administration is relying on states to expand their Medicaid programs under the healthcare reform law.
“The law doesn't authorize (the federal government) to deny payment to the hospital. … The state is the one that loses the money,” said healthcare attorney Kevin McAnaney, who helped write the Stark rules as an HHS regulations lawyer. “That's why it's never been finalized.” The feds have “no stomach” for holding states responsible for providers' financial misdeeds, he said.