D.C. Court Provides Clarity regarding Stark Law Rule against Physicians Mailing Medications to Patients’ Homes
In Community Oncology Alliance v. U.S. DHHS, the D.C. District Court has made it clear that the Stark Law’s In-Office Ancillary Service (“IOAS”) exception does not permit a physician’s office or physician-owned pharmacy to mail prescription medications to patients.
The case arose out of COVID pandemic era waivers and FAQs issued by the Department of Health and Human Services (“HHS”) following the pandemic. During the pandemic, HHS issued a waiver that permitted physicians to mail a patient’s medications to their home pursuant to the IOAS exception. Following the pandemic, HHS published a FAQ explaining that absent the waiver, dispensing medications to a patient’s home via the mail was not permitted pursuant to the IOAS exception. Community Oncology Alliance challenged the viability of the FAQ, alleging that it violated notice and comment rulemaking requirements. Ultimately, the D.C. District Court disagreed with Community Oncology Alliance’s position. In its opinion, the Court explained that the IOAS regulation, absent the pandemic era waiver, never permitted physicians to mail medications to patient homes.
The Stark Law prohibits a physician from referring certain “designated health services” to an entity with which the physician has a financial relationship. Outpatient medications are included in the list of designated health services. As such, a physician cannot refer an order for outpatient medications to be filled by their practice or physician owned pharmacy absent a Stark Law exception. The exception frequently relied upon by physician practices for this type of practice is the IOAS exception. The IOAS exception contains certain location requirements regarding where the service must be provided (or in this case, where the medication must be dispensed). In particular, the IOAS requires that the service can only be provided in the building utilized by the physician practice to provide services, i.e., the physician’s office.
In forming its opinion, the D.C. Court relied heavily on a separate CMS regulation that specifies where a service is furnished (see 42 C.F.R. § 411.355(b)(5)) and reasoned that a medication is dispensed to the patient where the patient actually receives the medication. The Court determined that a prescription drug that is mailed to a patient’s home is not dispensed to the patient in the physician’s office, but rather, is dispensed at the patient’s home.
The Court’s determination clears up any uncertainty regarding whether that the IOAS exception would cover mailing prescriptions to patients’ homes – such activity is not permissible pursuant to the IOAS exception. Physicians that engage in such activities for Medicare patients face civil penalties under the Stark Law, and potential liability pursuant to the False Claims Act.
If you have any questions about how this clarification may affect your practice, please do not hesitate to reach out to Richard Hill, Stuart Vogelsmeier, or any of the other members of Lashly & Baer’s Health Care Advisory Team.