Compliance laws and conflict of interest

Ethics and law work together to guide professional behavior in healthcare. Both recognize healthcare professionals' fiduciary duty to patients, meaning their duty to serve the interests of patients above personal interests. Conflicts of interest can occur when personal or financial interests influence clinical decision-making. Because these situations can contribute to fraud, abuse, and loss of public trust, several federal laws have been created to promote ethical and lawful healthcare practices. These include the “Big 3” compliance laws: the Stark Law, the Anti-Kickback Statute, and the False Claims Act.

Okay, a conflict of interest occurs when secondary interests, such as financial gain or personal relationships, influence professional judgment, decisions, or actions. Even the appearance of this influence can erode trust.

Conflicts can occur at both the individual and institutional level.

At the individual level, conflicts may arise when a clinician’s decisions about research, education, or patient care are influenced by financial relationships. For example, imagine a surgeon who receives financial incentives from a medical device company and consistently chooses that company’s artificial joints for patients, even when another option might be more appropriate.

At the institutional level, conflicts may occur when healthcare organizations have financial relationships that could influence research, technology partnerships, or purchasing decisions. For example, a university that owns shares in a company sponsoring its clinical trials may face concerns about objectivity. Similarly, a medical center that receives large donations from a pharmaceutical company could appear biased when promoting that company’s products.

Here's an important ethics connection! Beneficence emphasizes acting in the patient’s best interests. Financial incentives can interfere with objective clinical judgment and compromise that responsibility.

Now that that’s clear, let’s move on to the “Big 3” compliance laws: the Stark Law, the Anti-Kickback Statute, and the False Claims Act.

One major way healthcare law addresses conflicts of interest is through restrictions on self-referral, which is where the Stark Law comes in.

The Stark Law, also called the Physician Self-Referral Law, prohibits physicians from referring Medicare or Medicaid patients for certain services, known as designated health services, to an entity in which the physician or an immediate family member has a financial relationship, unless a specific exception applies. Designated health services include laboratory testing, radiology and imaging, physical and occupational therapy, and home health services.

One important feature of the Stark Law is that intent doesn’t matter. A physician can violate the law even without knowingly intending to do so. The law is designed to reduce conflicts of interest, prevent unnecessary services, and protect federal healthcare programs from improper billing. Stark violations can lead to civil penalties and exclusion from participating in Medicare, Medicaid, and other federal health care programs.

Let’s look at this in practice.

Dr. Sam owns a twenty percent stake in an MRI imaging center. If he refers his Medicare patients to that center for imaging services, this creates a conflict because he has a financial interest in where those patients are being sent.