The Thursday Report 8.23.2012

Providing updates and comments on Florida estate planning and creditor protection developments and insight for lawyers, CPAs, and other planning professionals



Welcome to this week’s Thursday Report, which profiles the limitations on physician self-referrals under the State and Federal laws.

Each week we will provide a fresh update as well as analysis and ideas associated therewith.  Please send us your ideas for future topics!

These reports are also posted on our website at

We welcome all questions, comments, and suggestions.


A great many medical practices are inadvertently out of compliance with the Stark Law and not aware of the Florida Patient Self-Referral Act.

The recent Fourth Circuit court case of U.S. ex rel. Drakeford v. Tuomey Healthcare System, Inc. is a reminder that litigation will be significantly affected by Stark Law compliance on non-compliance.  In this case several doctors were sued for having non-compliant relationships with hospitals that they referred to.

Not only is there the risk of repaying significant monies to Medicare and Medicaid for funds that have been received for diagnostic testing, physical therapy, occupational therapy, and other “designated health services” but violation of the Stark law can cause unenforceability of non-competition covenants, whistleblower actions by employees, ex-employees, ex-spouses and others who wish to earn significant monies or simply take pleasure in the devastation of medical practice, and potential medical license loss or suspension.

The primary Achilles heel normally involves medical groups who mistakenly believe that monies attributable to revenues from ordered tests or services can be allocated directly to the ordering physician.

While it is permissible for a member of a “group practice” to prescribe or recommend that the practice provide “designated health services” to its patients, a practice will not qualify as a “group practice” if all of the rules are not met, as described in our new white paper which will soon be published by Haddon Hall Publishing.

A chart comparing and summarizing the Stark Law and the Florida Patient Self-Referral Act is attached to this report, and our white paper on the Stark and Florida Patient Self Referral Act law can be sent to you upon request by emailing

Federal Stark Law Compliance

The federal Physician Self-Referral Law, commonly referred to as the Stark Law, generally prohibits a physician from making referrals for certain services covered by Medicare or Medicaid to an entity with which the physician or an immediate family member has a financial relationship,” unless a statutory exception applies. The Stark Law also prohibits a physician from submitting a claim for services arising from a prohibited referral to the Medicare or Medicaid program. A violation of this Law carries significant penalties, including license revocation and disqualification from the Medicare Program. To avoid these consequences, it is imperative that physicians understand this law and know how to comply with its stringent requirements.

Specifically, the Stark Law completely prohibits a physician from making referrals for “designated health care services” payable by Medicare or Medicaid to an entity with which he or she (or an immediate family member) has a financial relationship, unless a special statutory exception applies.

The Stark Law broadly defines the term “referral” to include any situation where a physician orders or requests a designated health service, requests a consultation with another physician who ultimately performs or supervises a designated health service, the establishment of a plan of care including the provision of designated health services.

However, a “referral” does not include designated health services “personally performed or provided” by the referring physician.

The Stark Law Regulations state that “a designated health service is not personally performed or provided by the referring physician if it is performed or provided by any other person, including, but not limited to, the referring physician’s employees, independent contractors, or group practice members.”[i] Thus, the referring physician must directly and personally provide the service to the patient.

The Trick

The trick here is to have and use good advisors, which will typically include a lawyer who can draft shareholder and employment agreements to help assure compliance with these rules, and an office manager and accountant who are familiar with the rules and make sure that the distribution of income follows appropriate methodology.

Health law compliance consultants are often used by knowledgeable practices to help assure compliance with these and other rules, including good charting and accurate coding, and monitoring as to the thoroughness of billing follow up.

Do not forget to also make sure that appropriate advisors understand and assure compliance with the Florida Patient Brokering Act, the Federal Anti-Kickback Statute, and the Florida Anti-Kickback Statute, among other rules.

The Trap

The Stark Law is a “strict liability” statute, meaning that any physician who violates the law, even by accident, may be subject to civil penalties. Penalties for violating the Stark Law can be severe, including denial of payment; required refunds of amounts collected in violation of the law; up to $15,000 in civil monetary penalties for each claim submitted in violation of the law; and up to $100,000 in civil monetary penalties for each arrangement considered to be a circumvention scheme. Further, physicians found in violation can be excluded from participation in federal health care programs.

A whistleblower lawsuit under the False Claims Act can be based on a violation of the Stark Law. For example, if a physician submits claims to Medicare or Medicaid that are the product of prohibited referrals, those claims can form the basis of a whistleblower lawsuit under the False Claims Act. This Act rewards whistleblowers by allowing them to file lawsuits on behalf of the government and share in any money that is recovered from the physician accused of fraud.

Whistleblowers in Stark cases tend to be healthcare administrators, accountants, benefits coordinators, and other healthcare professionals because these individuals are often in the best position to uncover fraudulent referral practices. By blowing the whistle on fraudulent referrals, whistleblowers are often able to collect large amounts of money. Further, the whistleblower laws protect them from being fired, demoted, or disciplined for reporting a fraudulent act.

The Florida Patient Self-Referral Act has very similar penalties and severe consequences for those who do not follow the rules.  Ignorance is not an excuse under either statute.

The trap is not attempting to comply with the rules, or innocently or negligently believing that the rules have been complied with or are not important. Going bankrupt, losing a medical practice, and losing a medical license would not be an enjoyable experience, and this can happen.

A Pirate’s Life for Me – What Boat Owners Need to Know about Their Liability

If the sea is calling your name, and you are considering buying-or have already bought-a boat, you need to understand your potential liability in the case of an accident. In order to understand your potential liability when operating a boat, you need to know which laws apply to you. Two different bodies of law apply to boat owner’s liability depending on where the accident occurred. Federal Maritime (Admiralty) Law is a separate body of law governing navigation and shipping. Specifically, maritime law applies only to “navigable waters.” A simplified definition of navigable waters would include waters of the United States that are used to transport goods or people in the channel of commerce. This can include oceans, rivers, streams and even lakes. State laws apply only to accidents that occur in non-navigable waters.

Maritime Liability

Under maritime law, the owner or operator of a vessel can be held liable for personal injury or loss caused by their negligence. In order to prove that a vessel owner or operator was negligent, the injured plaintiff must prove the same elements as any other negligent injury case: the vessel operator had a duty to that plaintiff, the operator breached that duty, their breach was the cause of the plaintiff’s injuries, and plaintiff was somehow damaged. So what duty do you, as an owner, owe to passengers and others while operating your boat? The law says that the operator has a duty to use reasonable care under the circumstances when operating the boat. Under maritime law, a boat owner can also be held liable for injuries that occurred because his boat was not “seaworthy.” Ensuring that your boat is seaworthy includes a duty to make sure that the person operating the boat is competent to drive the boat. In other words, don’t let anyone with a history of causing boating accidents drive your beloved yacht.

Maritime law also recognizes the tort negligent entrustment, which allows a plaintiff to sue the boat’s owner for injuries caused while someone else was driving. The boat’s owner must have either known, or should have known that the person to whom the boat was entrusted was likely to use it in a dangerous manner. The boat owner will not be liable unless they knew the person was incapable of operating the boat safely.

Even if your boat collides into another one day while you’re out catching tarpon, all is not lost. The boat’s owner may be able to reduce liability for acts that occurred without their “knowledge or privity” due to the maritime Limitation of Liability Act. This limitation may be particularly helpful in defending a suit where injuries occurred while someone else was driving. This law establishes that even if the plaintiff’s injuries were caused by the negligence of the operator of the boat, the owner of the boat is only liable up to the amount of the value of the boat or the value of the owner’s interest if owned by more than one person. “Privity” means that the owner somehow personally participated in the negligence which caused or contributed to the loss or injury.

Liability for Vessel Titled to a Corporation

If you choose to title a boat to a corporation in order to protect from liability, there are certain restraints that apply. In extreme cases, corporate protection can be lifted and the individual members of a corporation can be exposed to a lawsuit. This is called “piercing the corporate veil.” Piercing the corporate veil in a maritime case requires that the individual who is hiding under the corporation is using it to commit fraud or for his own personal business. Sole ownership of a corporation, in itself, is not enough to pierce the veil.

Florida Law

Under Florida law all vessels are considered to be “dangerous instrumentalities” and anyone operating a vessel must adhere to the “highest degree of care,” which is a higher standard of care than required by maritime law.  The statute states that only the operator of the boat, not the owner, is liable for injuries or damage unless the owner was physically on the boat when the accident occurred or was driving it at the time.  This applies even when the owner is asleep below deck. The spouse who normally drives the boat should therefore be the owner, or the boat should be titled to a corporation.

A boat owner can also be held liable for injuries or damage due to “negligent entrustment” when another person is operating the boat.  In Cashell v. Hart, the court held that the defendant knew or should have known that the operator of the boat was inexperienced and incompetent as a navigator, and was therefore negligent for entrusting the boat to that person.

The Trick

The trick is to title the boat in a Limited Liability Company, and do not make yourself an officer or director, and make sure that you have enough liability insurance. Luckily, boat owners can purchase boat insurance that covers not only the boat and equipment attached to the boat, but also provides coverage for liability lawsuits.  Policies can provide coverage of up to one million dollars, and are usually offered in $100,000 increments.  State Farm, Allstate, and Nationwide all offer these types of policies.

The Trap

The trap is that practically anyone who makes important decisions regarding the boat can be held liable for a large amount of money damages if there is an accident. The best recourse is to protect yourself before you ever get to that point by having plenty of liability insurance, not trusting anyone who might be considered untrustworthy to pilot a boat, not being an officer or director of a company that owns a boat, and questioning whether the boat should even be owned.  B.O.A.T. often stands for Bring Out Another Thousand, and everyone knows that the best day in the life of a boat owner is the day that they sell the boat, so advise and proceed accordingly.


August 23, 2012, 4:00 p.m. – 4:50 p.m. Please join us for The 4-4-4 Show, a monthly Clearwater Bar Association continuing education webinar series that qualifies for 1 hour of continuing education credit.  This month’s topic is “Tax Planning in an Election Year” with Ann Paxton and Jay Wadsworth, CPAs of PDR Certified Public Accountants.  To register please visit:

August 28, 2012, 12:30 p.m. – 2:00 p.m.  Alan S. Gassman, Esq., Kenneth J. Crotty, Esq. and Christopher Denicolo, Esq. are speaking on Avoiding Disaster for Affluent Floridians for our annual Bloomberg BNA Tax & Accounting webinar on this subject.  To register for the webinar please visit Please let us know if you would like a complimentary copy of our extensive PowerPoint used for this webinar.

Please contact us if you would like to request a copy of our article published in Leimberg Information Services regarding the recent Florida In re Cook case, which was profiled in the July 26, 2012 Thursday Report.

For details about each event, please visit us online at

Christopher Denicolo, J.D., LL.M. is a partner at the Clearwater, Florida law firm of Gassman, Crotty & Denicolo, P.A., where he practices in the areas of estate tax and trust planning, taxation, physician representation, and corporate and business law.  He has co-authored several handbooks that have been featured in Bloomberg BNA Tax & Accounting, Steve Leimberg’s Estate Planning and Asset Protection Planning Newsletters and the Florida Bar Journal.  Mr. Denicolo received his B.A. and B.S. degrees from Florida State University, his J.D. from Stetson University College of Law and his LL.M. (Estate Planning) from the University of Miami. 

Thank you to our law clerks who assisted us in preparing this report:

Allison Wallrapp graduated summa cum laude from Rollins College and is currently a third-year student at Stetson University College of Law.  Allison serves as a representative in the Student Bar Association and is on the executive board of Stetson Republicans.  Her interests in the law include business law, employment law, and taxation.  Her email address is

Kacie Hohnadell is a third-year law student at Stetson University College of Law and is considering pursuing an LL.M. in taxation upon graduation. Kacie is also the Executive Editor of Stetson Law Review and is actively involved in Stetson’s chapter of the Student Animal Legal Defense Fund. In 2010, she received her B.A. from the University of Central Florida in Advertising and Public Relations with a minor in Marketing, and moved to St. Petersburg shortly after graduation to pursue her Juris Doctor. Her email address is

[i]  42 C.F.R. 411.351.