123s of Orthopedic Medical Laws

March 14, 2022

Fixing bones and healing fractures is a daily routine for an orthopedic surgeon. To become an orthopedic surgeon, you navigate four years of medical school, plus a minimum of five years of residency, and often a fellowship. The hard work gets you into a successful business, practice or hospital position. You spend a lot of time away from your family to master your profession (as a son of an orthopedic surgeon I know how hard my dad worked). But now, you must be prepared to protect your license and the livelihood you’ve gained. To do so, you must be aware of the many traps often encountered by orthopedic surgeons. 

Ancillary Services

Being able to provide ancillary services for your orthopedic patients can be convenient for both you and your patients. These ancillary services, for example, are often physical therapy, labs or imaging. But when it comes to charging and referring patients for these medical services, this can trigger federal and state laws. While there are many laws and regulations at play in healthcare, the two most familiar federal laws are the physician self-referral law known as the “Stark Law” and the Federal Anti-Kickback statute.   

The Stark Law is the federal physician self-referral prohibition preventing physicians from making referrals for “designated health services” (“DHS”) payable by Medicare or Medicaid to entities with whom they (or an immediate family member) have a financial relationship. DHS are specific types of services that include among others, the three ancillaries mentioned above.  Recognizing the existence of several common, legitimate financial arrangements, exceptions to Stark’s general prohibition were created. To be compliant an arrangement must meet every element of a Stark exception. The penalties for physicians who violate Stark include fines as well as exclusion from participation in Federal Programs.

The abridged version of the Federal Anti-Kickback statute is that it generally prohibits any person (not just physicians) from soliciting, receiving, offering or paying anything of value to any person, in return for or to induce them to make referrals or recommendations for items or services where payment may be made in whole or in part by Medicare, Medicaid, TRICARE or other Federal healthcare programs. This statute is the kitchen sink of laws, as it has been broadly interpreted to cover any arrangement where one purpose of the remuneration was to obtain money for the referral of services or to induce further referrals. For orthopedic surgeons, it may come into play where financial relationships exist and patient referrals are happening between their practice and another entity providing an ancillary service, including the three ancillaries mentioned above.

Safe Harbors

The Government has enacted “safe harbors” to protect arrangements it deemed not likely to result in abuse of the Federal programs. Arrangements that satisfy every element of a particular safe harbor are not considered violations and would not be grounds for prosecution. However, unlike Stark exceptions, failure to meet one element of a safe harbor, does not make the arrangement per se illegal. Additionally, the federal Anti-Kickback has both criminal and civil penalties including fines, jail terms, and exclusion from participation in the Federal Programs.

Both Stark and the Federal Anti-Kickback statute are used to regulate the way physicians interact with others when ordering, prescribing or providing health care services, products or other supplies and space. It is critical that an orthopedic surgeon have a basic understanding of these laws in order to be better able to spot the red flags in any potential arrangement.

Relationships of Medical Device Companies

An ancillary investment opportunity that many orthopedic doctors are offered involve medical device companies. On the surface, this appears extremely normal in the industry. Finding the expert orthopedic surgeon to design a revolutionary new implant can improve the lives of thousands of people. 

But there is an ethical and legal dimension to consider for what comes next. Whether you receive royalty payments from an implant company or own a physician-owned device (“POD”) company, once again you will need to address the Stark and Anti-Kickback implications.  Beyond these however, there are other factors to consider. Some hospitals may have medical staff bylaws or policies prohibiting the purchase of implants from surgeon owned companies or companies where surgeons have a royalty agreement or some other financial arrangement. Even if the arrangement is completely legal, many hospitals will do this simply to avoid the possibility of impropriety. Also, one should always check with their state medical board rules prior to starting an implant company. In some states, the medical board may believe that POD companies are unethical or unprofessional. In Texas, for example, there is a requirement for all doctors who own implant companies to disclose their interest at the initial encounter with the patient and at the time of the referral which should be documented in the patient file.

More common in the industry are orthopedic surgeons being paid by medical device companies to provide consulting services. Problems begin to arise when the consulting services are not actually rendered or unnecessary, or payments exceed fair market value, as such issues give risk to significant kickback implications. Enforcement of these so-called “sham” consulting arrangements have been prevalent and headline the news frequently.

Medical Billing

Besides the focus on these laws applying to certain ancillary services, the Government also has laws on how you bill for medical services. The Federal False Claims Act can be triggered if a practice improperly codes for medical services. One common example impacting orthopedic surgeons involves billing by mid-level providers (physician assistants or nurse practitioners). If a patient is seen by a physician-assistant for an office visit but the practice billed it such that the claim represents the physician treating the patient, this will create issues. If the physician-assistant was providing services “incident to” the physician, the practice must use the proper modifiers when submitting the claim to the payor. To prevent potential violations, a physician must have a solid understanding of the coding and billing process.

Contact ByrdAdatto

As an orthopedic surgeon, you will invariably encounter many different arrangements that have the potential to cause serious problems if not done correctly. There is no simple checklist to run through to ensure compliance. It’s all about asking the right questions, identifying the potential issues, but most importantly involving healthcare counsel from the beginning. 

If you have questions about compliance, contact us at info@byrdadatto.com to schedule a consultation.

ByrdAdatto Founding Partner Bradford E. Adatto

Bradford E. Adatto

Brad decided to become a lawyer during sixth-grade Career Day, when he promised to represent his best friend, a future doctor. A few decades later, he started his own law firm that focused on representing health care and corporate clients.

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