The federal law generally known as "Stark" prohibits physicians from referring Medicare patients to receive certain services from entities with which the physician has a financial relationship. Although there are several narrow exemptions to the prohibition, recent regulations have also created a useful catch-all exemption.
This new "fair market" exception protects an arrangement between an entity and a physician or any group of physicians (regardless of whether the group meets the Stark definition of a group practice) if the arrangement meets the following conditions:
1. The arrangement must be in writing, be signed by the parties, and only cover items or services specified in the agreement;
2. The agreement must specify the timeframe for the arrangement, which can be for any period of time and contain a termination clause, provided the parties enter into only one arrangement for the same items or services during the course of a year, except that an arrangement made for less than 1 year may be renewed any number of times if the terms of the arrangement and the compensation for the same items or services do not change;
3. The agreement must specify the compensation that will be provided under the arrangement in advance, and such compensation must be consistent with fair market value, and not be determined in a manner that takes into account the volume or value of any referrals or any other business generated by the referring physician; and
4. The arrangement must involve a transaction that is commercially reasonable, furthers the legitimate business purposes of the parties, and does not violate any other state or federal law.