Stark Law: Who Is Bound By This Regulation?

The Stark Law, or Physician Self-Referral Law, is a set of laws that prohibit physicians from referring patients to receive designated health services (DHS) payable by Medicare or Medicaid from entities with which they, or an immediate family member, have a financial relationship. The law is named after former Congressman Pete Stark, who sponsored the initial bill. The law applies to physicians, physician assistants, and nurse practitioners, and aims to prevent medical decisions from being influenced by financial motives, such as fraud and abuse, that could increase healthcare costs.

Who does Stark Law apply to?

The Stark Law is a set of United States federal laws that prohibit physician self-referral. It is named after former Congressman Pete Stark, who was the original sponsor of the bill. The law makes it illegal for physicians to refer patients to receive "designated health services" (DHS) payable by Medicare or Medicaid from entities with which they, or an immediate family member, have a financial relationship. This includes ownership, investment interest, and compensation arrangements.

The basic idea of the Stark Law is to restrict the degree to which physicians can refer patients to entities in which they have a financial interest. This is to ensure that medical referrals are made for medical reasons, rather than business reasons. The law seeks to eliminate physician decision-making with financial motives, such as fraud and abuse, that could increase overall healthcare costs.

While the law includes the term "physician", it also applies to physician assistants (PAs) and nurse practitioners (NPs) who make referrals. 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.

The Anti-Kickback Statute and Stark Law do not apply to physicians who are not offering services covered by government programs such as Medicare or Medicaid. The Stark Law applies specifically to government programs and does not apply to private insurance.

What is a financial relationship?

The Stark Law is a set of laws that regulate referrals by physicians. It makes it illegal for physicians to refer patients to entities in which they have a financial interest. This includes ownership or investment interests and compensation arrangements.

A financial relationship is defined as either an ownership or investment interest in an entity or a compensation arrangement with an entity. An ownership or investment interest may be through equity, debt, or other means, and includes an interest in an entity that holds an ownership or investment interest in any entity providing designated health services. A compensation arrangement is any arrangement involving remuneration, direct or indirect, between a physician and an entity. This can include cash payments, as well as in-kind transfers such as office space, equipment, or other benefits.

A direct financial relationship exists if remuneration passes between the referring physician (or a member of their immediate family) and the entity furnishing designated health services without any intervening persons or entities. An indirect financial relationship exists if there is an unbroken chain of persons or entities having ownership or investment interests between the referring physician and the entity furnishing designated health services.

The Stark Law is designed to restrict the degree to which physicians can refer to entities in which they have a financial interest, in order to keep medical referrals based on medical decisions rather than business decisions. It is important for physicians to understand and comply with the Stark Law to avoid criminal penalties, civil fines, exclusion from Federal health care programs, or loss of their medical license.

What are the penalties for violating Stark Law?

The Physician Self-Referral Law, commonly referred to as the Stark 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. Financial relationships include both ownership/investment interests and compensation arrangements.

Penalties for physicians who violate the Stark Law can be severe and include:

• Denial of payment
• Refund of payment
• Fines
• Exclusion from participation in the Federal health care programs
• Loss of medical license from the State medical board
• A $15,000 per service civil monetary penalty
• A $100,000 civil monetary penalty for each arrangement considered to be a circumvention scheme

The Stark Law is a strict liability statute, which means proof of specific intent to violate the law is not required. The law prohibits the submission, or causing the submission, of claims in violation of the law's restrictions on referrals.

The Anti-Kickback Statute (AKS) is a criminal law that prohibits the knowing and willful payment of "remuneration" to induce or reward patient referrals or the generation of business involving any item or service payable by the Federal health care programs. Criminal penalties and administrative sanctions for violating the AKS include fines, jail terms, and exclusion from participation in the Federal health care programs.

What are the exceptions to Stark Law?

The Stark Law, or the Physician Self-Referral Law, is a federal law that 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 the Stark Law, known as "safe harbors".

Firstly, the Stark Law does not apply to physicians who are not offering services covered by government programs such as Medicare or Medicaid. It is important to note that while the Anti-Kickback Statute and Stark Law do not apply to private insurance, there may be similar anti-self-referral statutes enacted at the state level that apply to private insurance.

Secondly, the Stark Law only applies to "designated health services", which include clinical laboratory services, physical therapy, occupational therapy, outpatient speech-language pathology services, radiology and certain other imaging services, radiation therapy services and supplies, parenteral and enteral nutrients, equipment and supplies, prosthetics, orthotics, and prosthetic devices and supplies, home health services, outpatient prescription drugs, and inpatient and outpatient hospital services. If the health service involved is not a designated health service, the Stark Law does not apply.

Thirdly, there are specific exceptions related to compensation arrangements that do not constitute a financial relationship. These include rental of office space or equipment, bona fide employment relationships, personal service arrangements, physician recruitment, isolated transactions, certain arrangements with hospitals, payments by a physician, charitable donations by a physician, non-monetary compensation, fair market value compensation, medical staff incidental benefits, risk-sharing arrangements, compliance training, indirect compensation arrangements, referral services, obstetrical malpractice insurance subsidies, community-wide health information systems, electronic prescribing items and services, electronic health records items and services, assistance to compensate a non-physician practitioner, timeshare arrangements, limited remuneration to a physician, arrangements that facilitate value-based healthcare delivery and payment, and cybersecurity technology and related services.

It is important to note that these exceptions have specific requirements and conditions that must be met to qualify for the exception. For example, for the rental of office space to be considered an exception, the arrangement must be set out in writing, signed by the parties, and specify the premises it covers. The duration of the lease must be at least one year, and the rental charges must be consistent with fair market value.

Overall, while the Stark Law prohibits physicians from self-referring, there are several exceptions to this law that allow for certain financial relationships and compensation arrangements. These exceptions are intended to provide flexibility while still maintaining the integrity of the healthcare system and protecting patients.

What is a referral?

The Stark Law, also known as the Physician Self-Referral Law, is a federal civil law that prohibits physicians from making referrals for certain designated health services (DHS) payable by Medicare or Medicaid to an entity with which they or their immediate family have a financial relationship. The basic idea behind the Stark Law is to restrict the degree to which physicians can refer patients to entities in which they have a financial interest, ensuring that medical referrals remain medical decisions rather than business decisions.

A referral from a trusted medical source is valuable for patients seeking the best medical care. The Stark Law aims to protect patients from compromised medical referrals by their physicians and prevent self-interested physicians from abusing referrals and patient trust for financial gain. Financial relationships include ownership or investment interests and compensation arrangements. For example, if a physician owns a durable medical equipment company, the Stark Law prohibits them from referring a patient to that company.

The types of designated health services covered under the Stark Law include clinical laboratory services, physical therapy, occupational therapy, outpatient speech-language pathology services, radiology and certain other imaging services, radiation therapy services and supplies, parenteral and enteral nutrients, equipment and supplies, prosthetics, orthotics and prosthetic devices and supplies, home health services, outpatient prescription drugs, and inpatient and outpatient hospital services.

The Stark Law establishes specific exceptions and grants the Secretary of the Department of Health and Human Services (HHS) the authority to create regulatory exceptions for financial relationships that do not pose a risk of program or patient abuse. For instance, it makes an exception for ownership of shares in publicly traded companies on exchanges like NASDAQ or NYSE and ownership of shares in public companies through mutual funds. Other exceptions, with conditions, include preventative screening tests, vaccines, and eyeglasses or contact lenses following cataract surgery.

Violating the Stark Law carries financial penalties and can result in a stain on a physician's practice or organization. It is important for physicians to understand and comply with the Stark Law to avoid legal consequences and maintain patient trust.

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