Stark Exception For ESRD Not Recognized In Florida

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On January 10, 2013, the U.S. Court of Appeals for the Eleventh Circuit ruled in Fresenius Medical Care Holdings, Inc. v. Tucker, that an arrangement can violate Section 456.053 of the Florida Statutes, also known as Florida's "Patient Self-Referral Act of 1992" (Florida Act) even though the arrangement complies with federal Stark Law.

In the Fresenius case, out-of-state corporations (Appellants) provide renal dialysis services in Florida, both directly and through subsidiary corporations, to patients suffering from end-stage renal disease (ESRD). The Appellants sought to use a vertically integrated business model in Florida so they can refer all of their ESRD patients' blood work to associated laboratories after providing the patients dialysis treatment at their clinics. This arrangement, however, would create a violation of the Florida Act, even though it was permissible under Stark Law.

The Stark Law prohibits physicians from referring their Medicare and Medicaid patients to business entities for designated health services in which the physicians or their immediate family members have a financial interest. However, in promulgating the regulations to implement Stark, the Secretary of HHS created an exception that allows physician referrals to associated entities for clinical laboratory services related to the treatment of ESRD, in addition to several other exceptions. Originally, the Florida Act, like the Stark Law, exempted physicians in the renal dialysis industry from the self-referral prohibition, but this exemption subsequently was repealed by the Florida Legislature in 2002.

The Appellants in Fresenius challenged the Florida Act since the proposed arrangement would be permissible under the Stark Law, claiming that the Florida Act was unconstitutional because (1) it was preempted by federal law; (2) it violated the dormant Commerce Clause; and (3) it violated substantive due process. However, the Eleventh Circuit Court of Appeals did not agree. As a result, the Florida Act remains valid, despite the fact that it prohibits conduct allowed under Stark Law.

There are other differences between Stark Law and the Florida Act beyond the ESRD exception. Therefore, when considering an arrangement involving physicians in Florida, it is important to evaluate whether the arrangement complies with both federal and state law.

For more information, please contact David L. Schick at dschick@bakerlaw.com or 407.649.4084 or Jessica Captain Novick at jcaptainnovick@bakerlaw.com or 407.649.4025.

Topics:  Commerce Clause, ESRD, HHS, Patient Self-Referral, Preemption, Stark Law

Published In: General Business Updates, Conflict of Laws Updates, Constitutional Law Updates, Health Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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