Gavin Howe
The Stark Law is a federal statute that prohibits physicians from referring patients to entities with which they or their immediate family members have a financial relationship for designated health services (DHS) payable by Medicare or Medicaid. The law aims to protect patients from unnecessary care driven by financial relationships and ensure healthcare providers are paid fairly. It is a strict liability statute, meaning a defendant is liable for their actions without proof of specific intent to violate the law. The Stark Law contains several exceptions, including physician services, in-office ancillary services, and ownership in publicly traded securities. Contracts between physicians and hospitals must adhere to seven safe harbors to alleviate the risk of violation. Recent years have seen increased enforcement and more stringent applications of the Stark Law, with violations resulting in criminal penalties, civil fines, and exclusion from federal healthcare programs. Case 12, which involves 15 doctors in Texas, exemplifies the legal and financial repercussions of Stark Law violations, with the doctors agreeing to pay over $28 million in settlements.
| Characteristics | Values |
|---|---|
| What is Stark Law? | A set of United States federal laws that prohibit physician self-referral, specifically a referral by a physician of a Medicare or Medicaid patient to an entity for the provision of designated health services ("DHS") if the physician (or an immediate family member) has a financial relationship with that entity. |
| What is a "referral"? | A request for a specific or service by a physician for Medicare Part B services and/or a care plan that includes designated health services. |
| What is a "financial relationship"? | Ownership, investment interest, and compensation arrangements. |
| What is DHS? | Clinical laboratory services, physical therapy services, occupational therapy services, radiology services, radiation therapy services and supplies, durable medical equipment and supplies, parenteral and enteral nutrients, equipment and supplies, prosthetics, orthotics, and prosthetic devices and supplies, home health services, outpatient prescription drugs, inpatient and outpatient hospital services, and outpatient speech-language pathology services. |
| Who enforces Stark Law? | The Department of Justice, CMS, and the Department of Health and Human Services. |
| What are the penalties for violating Stark Law? | Fines, exclusion from participation in Federal healthcare programs, criminal penalties, civil fines, and loss of a medical license from the State medical board. |
| What are some examples of Stark Law violations? | 15 doctors in Texas received payments from management service organizations (MSOs) that were identified as investment returns but were related to doctor referrals. Wheeling Hospital in West Virginia was accused of paying physicians above market value and based on the number of referrals, while billing Medicare for services not provided to patients. |
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What You'll Learn
What is the Stark Law?
The Stark Law, or the Physician Self-Referral Law, is a set of United States federal laws that prohibit physicians from referring patients to receive designated health services (DHS) payable by Medicare or Medicaid from entities with which the physician or an immediate family member has a financial relationship. The term "referral" means a request for a specific item or service by a physician for Medicare Part B services and/or a care plan that includes designated health services.
The Stark Law was first introduced in 1989 as part of the Omnibus Budget Reconciliation Act and was named after its sponsor, Congressman Fortney "Pete" Stark. It was initially enacted in 1992 and expanded in 1995. The law contains several exceptions, including physician services, in-office ancillary services, ownership in publicly traded securities and mutual funds, rental of office space and equipment, and bona fide employment relationships. These exceptions are designed to protect certain business arrangements that are unlikely to result in fraud or abuse.
The law is a strict liability statute, which means that a defendant is liable for their actions without proof of specific intent to violate the law. This means that even if a physician inadvertently refers a patient for DHS with no intention of bolstering the financial status of the healthcare entity providing the DHS, they would still be culpable.
Violations of the Stark Law can result in significant penalties, including fines, exclusion from participation in federal healthcare programs, and loss of medical licenses. In recent years, enforcement of the Stark Law has become increasingly aggressive, and there has been an increase in government enforcement actions and whistleblower lawsuits involving alleged violations.
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What are the penalties for violating the Stark Law?
The Stark Law, also known as the Physician Self-Referral Law, is a strict liability statute, meaning that proof of specific intent to violate the law is not required. The law prohibits physicians from referring patients for "designated health services" payable by Medicare or Medicaid if the physician or their immediate family member has a financial interest in the entity to which they are referring patients.
Penalties for physicians who violate the Stark Law can be severe, even if the violation was unintentional or unknown to the practitioner. These penalties include fines, exclusion from federal and state healthcare programs, and personal liability for executives. Fines for non-compliance are no longer always insurable, making healthcare executives personally liable in some cases for oversight failures. Civil penalties can reach up to $15,000 for each service that a person "knows or should know" was provided in violation of the law, and three times the amount of the improper payment received from Medicare. If it is proven that there was an intentional violation of the self-referral law, fines can go up to $100,000 per violation.
In addition to fines, those found at fault may be required to give back all payments for improperly collected amounts. The health service that benefited from the self-referral will have to refund all improperly collected payments, plus three times the amount if the payment was received from Medicare. Physicians who violate the Stark Law may also face exclusion from participation in Federal health care programs, such as being added to the HHS OIG Exclusion List.
To avoid Stark Law violations, healthcare organizations should implement a strong compliance program with regular, proactive oversight. This includes conducting internal audits, reviewing financial arrangements, and seeking legal counsel to ensure compliance with the law and other relevant regulations.
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How does the Stark Law relate to other laws?
The Stark Law is a set of United States federal laws that prohibit physician self-referral, specifically referring a Medicare or Medicaid patient to an entity for designated health services (DHS) if the physician has a financial relationship with that entity. The law is named after United States Congressman Pete Stark, who sponsored the initial bill in 1989.
The Stark Law is related to several other laws and is enforced by multiple federal entities, including the Department of Justice, CMS, and the Department of Health and Human Services. Here are some of the ways in which the Stark Law relates to other laws:
- False Claims Act (FCA): The False Claims Act prohibits the submission of fraudulent claims seeking payment from Medicare or Medicaid when a provider knows or should have known that the claims were false. Violations of the Stark Law may also indicate violations of the FCA. For example, submitting claims for services provided in violation of the Stark Law's restrictions on referrals can be considered false or fraudulent under the FCA.
- Anti-Kickback Statute (AKS): The AKS prohibits the offering or payment of remuneration to induce patient referrals or generate business involving items or services payable by Medicare, Medicaid, or other federal healthcare programs. Violations of the Stark Law may also implicate the AKS.
- Exclusion Authorities: These laws give the Office of Inspector General (OIG) the authority to exclude individuals and entities from participation in Federal healthcare programs under certain circumstances, including convictions related to healthcare fraud, patient abuse, or felony convictions. Violations of the Stark Law can result in exclusion from these programs.
- Civil Monetary Penalties Law (CMPL): The CMPL imposes civil fines and penalties for violations of healthcare fraud and abuse laws, including the Stark Law. Penalties for violating the Stark Law can include civil penalties of up to $15,000 for each service that violates the law and up to $100,000 for attempting to circumvent the law.
- Omnibus Budget Reconciliation Act of 1993 ("Stark II"): This legislation expanded the original Stark Law ("Stark I") to include additional health services and applied it to both Medicare and Medicaid. "Stark II" also included modifications and clarifications to the exceptions in the original law.
- Patient Protection and Affordable Care Act: Recent amendments to this Act have led to more stringent enforcement of the Stark Law.
These are some key ways in which the Stark Law relates to other laws and regulatory frameworks in the United States. The Stark Law is an important component of healthcare fraud and abuse prevention, and its enforcement intersects with multiple other legal authorities.
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What are the exceptions to the Stark Law?
The Stark Law, or the Physician Self-Referral Law, prohibits physicians from referring patients to receive "designated health services" payable by Medicare or Medicaid from entities with which the physician or an immediate family member has a financial relationship. However, there are several exceptions to this law, which are as follows:
- Referral to another physician of the same practice as the referring provider.
- Referral to a family member for designated health services in rural areas as designated by CMS.
- Referral to prepaid organisational health services such as health maintenance organisations (HMOs).
- Referral to academic medical centres, provided that certain conditions are met.
- Referral for preventative services, including screening exams/tests, immunizations, and vaccines, as long as they meet the relevant frequency limits mandated by the Centers for Medicare & Medicaid Services (CMS) and are reimbursed by Medicare based on the fee schedule.
- Equity in publicly traded security as issued by a corporation.
- Non-monetary compensation, provided that the amount does not exceed $300 per year and is not related to the number of referrals provided.
- Compliance training.
- Risk-sharing arrangements.
- Professional courtesy.
- Retention payments.
- Electronic health records.
- Timeshare arrangements.
- Assistance to compensate a non-physician practitioner.
- Incidental benefits to medical staff and personnel.
- An incentive plan for physicians, provided that it does not limit any necessary medical services to those who are eligible for such services.
- Hiring physicians to join the staff of a medical facility, provided that certain conditions are met.
- Charitable contributions by physicians, provided that they are not based on the number of referrals received.
- Ancillary services such as prescription medications, lab services, and radiology.
- Referral to a contractor physician in the same group practice.
It is important to note that this list of exceptions is not exhaustive, and there may be additional requirements specific to each exception. Additionally, the laws and exceptions are subject to change over time.
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How do you know if the Stark Law applies?
The Stark Law is a set of United States federal laws that prohibit physician self-referral. Specifically, it relates to referrals by a physician of a Medicare or Medicaid patient to an entity for designated health services ("DHS") if the physician (or an immediate family member) has a financial relationship with that entity. The term "referral" means "the request by a physician for the item or service" for Medicare Part B services and "the request or establishment of a plan of care by a physician which includes the provision of the designated health service" for all other services.
The Stark Law contains several exceptions, including physician services, in-office ancillary services, ownership in publicly traded securities and mutual funds, rental of office space and equipment, and bona fide employment relationships. However, it is essential to understand the law and know which, if any, of the exceptions apply to a particular situation. Seeking appropriate legal advice is recommended when dealing with financial relationships associated with designated health services provided to Medicare and Medicaid patients.
The law initially applied to physician referrals for clinical laboratory services but has since expanded to include other DHS such as physical and occupational therapies, radiology services, medical equipment, inpatient hospital services, outpatient prescription services, and home health services. The Centers for Medicare and Medicaid Services (CMS) have issued rules to implement the Stark Law, with Phase I, Phase II, and Phase III final rules published in 2001, 2004, and 2007, respectively.
Contracts between physicians and hospitals must adhere to seven safe harbors to alleviate the risk of violating the Stark Law. These include requirements such as a duration of at least one year, being in writing and signed by both parties, specifying aggregate payment, and ensuring payment is reasonable and fair market value.
Violations of the Stark Law can result in criminal penalties, civil fines, exclusion from federal healthcare programs, or loss of a medical license. It is a strict liability statute, meaning a defendant is liable for their actions without proof of specific intent to violate the law.
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Frequently asked questions
The Stark Law is a set of United States federal laws that prohibit physician self-referral, specifically a referral by a physician of a Medicare or Medicaid patient to an entity for the provision of designated health services ("DHS") if the physician (or an immediate family member) has a financial relationship with that entity.
A financial relationship includes ownership, investment interest, and compensation arrangements.
Penalties for physicians who violate the Stark Law include fines as well as exclusion from participation in Federal health care programs.
In 2020, Wheeling Hospital in West Virginia agreed to pay $50 million for violating the Stark Law. Another example is a 2022 case in which 15 doctors in Texas agreed to pay over $28 million in settlements related to violations of the Anti-Kickback Statute and Stark Law.
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