Stark Law and Gifts Sent to Your Medical Practice

It is the holiday season, and that means two things: I must avoid shopping malls and my office will be inundated with calls from physicians and vendors wondering if it is permissible to give or accept gifts. The short answer: If the gift is cash, or anything like cash, (such as a Visa gift card redeemable for cash,) just say ‘no.”

As the credit card tagline goes, “for everything else,” there’s a regulation.  First, anything of value directly or indirectly provided to a physician (or their family members and office staff) may implicate the federal law prohibiting certain referrals by physicians, 42 U.S.C. § 1395nn (the “Stark Law”) and the federal anti-kickback statute, 42 U.S.C. § 1320 a-7b (b) (the “Antikickback Statute”). Hospitals organized under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the “Code” or the “IRC”) are also subject to certain restrictions and reporting obligations in connection with such gifts and incidental benefits (the “Federal Tax Requirements”).

Second, effective January 2012, the Sunshine Act required that pharmaceutical companies and durable medical equipments suppliers report gifts to physicians in excess of $25. But CMS was bombarded with comments following the release of draft regulations. CMS now says it will not begin collecting data until 2013. This delay, however, should not be read to mean that until 2013, you can accept a gift certificate to Pebble Beach Golf Resort “just this once.” The delay simply means the vendor need not report a gift to the government. Stark Law and Anti- Kickback Statute regulations remain in full effect.

Stark Law and the Anti- Kickback Statute consider “gifts” a form of “compensation” arrangement. Stark Law regulations published in 2007 contain a Safe Harbor for non-monetary compensation. The aggregate limit was $300, and has been adjusted for inflation each year. Today the limit is in the range of $330. Medical staff gifts have a limit of $25 per gift, adjusted each year, with no aggregate limit.

In addition, the gift may not be solicited by the physician or your staff. There are a few other rules: (a) amount of the gift cannot be determined in a manner that takes into account the volume or value of referrals; (b) the gift must not violate the Anti- Kickback Statute; and (c) cash and cash equivalents are strictly prohibited, as are gifts or free items offered to group practices (e.g., medical equipment), even if the thresholds are not exceeded in the aggregate.

Particularly suspect are gifts which are given after each referral, or after a particularly successful referral.

The AMA, addressed vendor gifts in Ethical Opinion 8.061, “Gifts to Physicians from Industry.” Although the AMA recognizes that gifts given to physicians by companies in the pharmaceutical, device, and medical equipment industries often serve an important and beneficial function, the AMA Ethical Opinion recommends that certain guidelines be followed (click on the link above), including that any gifts accepted by physicians should primarily entail a benefit to patients and should not be of substantial value.