By: K. Kelly White Bryant and Sarah Cronan Spurlock
House Bill 151, “An Act Relating to Insurance Fraud,” was signed by the Kentucky Governor on March 26, 2019 and went into effect on June 27, 2019. In part, the Act creates a new section of the Kentucky Motor Vehicle Reparations Act (KRS 304.39) that prohibits healthcare providers who receive payment from basic or added reparations benefits under the KMVRA from “self-referring” patients to facilities with which the providers have a financial relationship.
The Kentucky Motor Vehicle Reparations Act
As background, the general rule of the Kentucky Motor Vehicle Reparations Act (sometimes referred to as the No-Fault Law) is that every person, with a few exceptions, suffering economic loss (medical expense, work loss, etc.) from a bodily injury arising out of the maintenance or use of a motor vehicle is entitled to basic reparation benefits.
These benefits are often referred to as personal injury protection, or PIP, benefits. The maximum amount of basic reparation benefits payable to one person for injuries suffered in one accident is $10,000.
One purpose of the KMVRA is to “encourage prompt medical treatment and rehabilitation of the motor vehicle accident victim by providing for prompt payment of needed medical care and rehabilitation.”
There are many healthcare providers in Kentucky who treat individuals who have been in car accidents and who receive payment for their services from the individuals’ PIP benefits. In many cases, the new self-referral prohibition will apply to these healthcare providers.
New Self-Referral Prohibition
The new self-referral prohibition in the Act is broad and applies to all types of healthcare providers (physicians, physician assistants, physical therapists, occupational therapists, massage therapists, podiatrists, chiropractors, dentists, nurses, pharmacists, psychologists, optometrists, paramedics and other first responders, medical imaging professionals, athletic trainers, respiratory care practitioners, orthotists, prosthetists, pedorthists, acupunturists, medical laboratories, etc.) if the healthcare provider is not enrolled in the Kentucky Medicaid program. The language in the new law mirrors the federal physician self-referral prohibition for healthcare services payable by Medicare, known as the Stark Law.
Specifically, Kentucky’s new law prohibits a healthcare provider who is not enrolled in Kentucky Medicaid from making referrals for healthcare services payable by PIP benefits to a person or entity with which he or she has a direct or indirect financial relationship (ownership, investment, or compensation), unless a Stark Law exception or federal Anti-kickback Statute (AKS) safe harbor applies.
The law also prohibits a person or entity from presenting, or causing to be presented, or collecting payment on a claim or bill referred to the person or entity in violation of the referral prohibition.
As stated above, the implicated financial relationships include direct and indirect ownership or investment interests and direct or indirect compensation arrangements. Kentucky’s new law seeks to prevent healthcare providers from referring patients to facilities where the provider has an ownership or investment interest in the person or entity, or where there is a compensation arrangement between the provider and the person or entity.
Example 1: The new law would prohibit a physician who is not enrolled in Kentucky Medicaid from referring a healthcare service payable by PIP benefits to the healthcare clinic where the physician works, unless a Stark Law exception or AKS safe harbor is met.
Example 2: The new law would prohibit a physical therapist who owns a clinic and is not enrolled in Kentucky Medicaid from referring patients to the clinic for healthcare services payable by PIP benefits, unless a Stark Law exception or AKS safe harbor is satisfied.
Protect Self Referrals
The Stark Law exceptions and AKS safe harbors most commonly used to protect “self-referrals” include those for employment relationships, independent contractor relationships, in-office ancillary services, space leases, and equipment leases.
Common requirements in many of the exceptions and safe harbors are that the compensation amount be set in advance, consistent with fair market value, and not determined in a manner that considers the volume or value of any referrals or other business generated between the parties.
Importantly, insurers are not required to pay for healthcare services referred in violation of the new law. Further, if any person or entity is paid any amount that was collected in violation of the new law, the person or entity is required to refund that amount to the insurer on a timely basis.
Penalties for violating the new self-referral prohibition range from $1,000 to $5,000 for each instance in which a person or entity bills or collects payment for healthcare services that were referred in violation of the law and for each instance in which a person or entity knowingly fails to timely refund any amount collected in violation of the law. The new law also enacts civil penalties of up to $25,000 “per arrangement or scheme” that violates the self-referral prohibition.
In sum, we recommend that individuals and entities that receive payment for healthcare services from PIP benefits analyze whether the new self-referral prohibition applies to their financial relationships and, if so, whether a Stark Law exception or AKS safe harbor can be satisfied.
Other Changes Under the Act
Separate from the creation of the new self-referral prohibition, the Act also amended the following:
- KRS 304.47-020 establishes a range of criminal penalties resulting from conviction of insurance fraud.
- KRS 304.47-050 requires certain Kentucky health professional boards to report suspected insurance fraud to the Department of Insurance’s Division of Insurance Fraud Investigation and to require the boards to provide information requested by the insurance commissioner.
- KRS 189.635 requires the Department of Kentucky State Police to redact vehicle accident reports provided to news-gathering organizations.
-K. Kelly White Bryant and Sarah Cronan Spurlock are Members at Stites & Harbison in Louisville, Ky.
Latest posts by Sally McMahon (see all)
- Healthcare Fellows: Session 4 recap - May 21, 2020
- UofL report shows COVID-19 hospitalizations plateau - May 20, 2020
- LHCC, Aging2.0 partner to accelerate aging innovation - May 20, 2020