Last Updated on: 28th July 2023, 07:23 pm

The Stark Law is federal legislation that was intended to limit physician referrals that might constitute significant conflicts of interests. In the absence of a specific exception, the Stark Law prohibits physicians and other health care providers from making certain referrals for designated health care services when the referring physician or health care provider, or a member of his or her family, has a financial relationship with the entity providing that service. This prohibition applies specifically to Medicare and Medicaid patients. Health care providers who are subject to the Stark Law include dentists, osteopaths, podiatrists, optometrists and chiropractors as well as medical doctors. Family members subject to the Stark Law includes spouses, parents, children, stepchildren, in-laws, grandparents, grandchildren, and the spouses of these individuals.

In the original legislation, which was passed as a provision to the 1989 Omnibus Budget Reconciliation Act, “designated health care services” were specified as clinical laboratory services that might be covered under Medicare Part B services. The 1993 Omnibus Budget Reconciliation Act expanded these services to include physical therapy, occupational therapy, radiology and imaging studies, medical and prosthetic equipment, inpatient and outpatient hospital services, home health services and outpatient prescription drugs for both Medicare and Medicaid patients. The original law is often known as Stark I while the expansion of its scope that occurred in 1993 is familiarly known as Stark II.

In 2007, the Center for Medicaid and Medicare Services made additional modifications to the Stark Law’s scope, which became known as Stark III.

The Anti-Kickback Statute

Many activities that give rise to liability under the Stark law are also actionable under the Anti-Kickback statute, but whereas the Stark Law carries civil penalties, the Anti-Kickback statute attaches criminal penalties to the solicitation for referrals. The Anti-Kickback statute was included under the 2010 Patient Protection and Affordable Care Act as an update to an existing piece of legislation called the False Claims Act, which is a more general piece of legislation that makes any person or business that is attempting to deceive the government liable for fraud.

Under the terms of the Anti-Kickback Law, “a person need not have actual knowledge … or specific intent to commit a violation.” In other words, ignorance of the law is no excuse, and medical providers who violate the False Claims Act cannot argue successfully that they were unaware that the Anti-Kickback Law existed.

Exceptions

Certain financial relationships are recognized as exceptions to the Stark Law. In addition to the exceptions and exclusions codified in the law, the administrator of the Center for Medicaid and Medicare Services also has the right to create regulatory exceptions.

Physicians may refer patients to other physicians who are working in the same practice, for example, and they may refer that patient for laboratory, radiology, outpatient pharmacy and other services that are provided by their practice. This is known as the In-Office Ancillary Services Exception.

Physicians may also refer Medicaid and Medicare patients to receive designated health services at for-profit hospitals that said physicians have an ownership stake in so long as that stake is in the whole hospital and not in any specific department. This is known as the Whole Hospital Exception. In order to be eligible for the Whole Hospital Exception, the referring physician must have privileges at the hospital.

The Stark Law describes its exceptions at some length and codifies the conditions that must be met in order for the exception to apply. Each condition must be complied with strictly, or the referring provider may be committing a Stark Law violation. This is why it’s so important to consult with a health law attorney any time a health care provider is considering accepting referrals from a physician with whom he or she has a preexisting financial relationship.

Enforcement

The Stark Law is enforced by a number of federal agencies, including the Department of Justice, the Department of Health and Human Services and the Center for Medicaid and Medicare Services. Since the 2010 passage of the Patient Protection and Affordable Care Act and its Anti-Kickback amendment to the False Claims Act, the government has become increasingly aggressive about prosecuting Stark Law violations.

Stark Law Violations

Penalties for violating the Stark Law can be quite severe. Noncompliant practitioners and institutions risk denial of payment, as well as the imposition of a $15,000 civil fine for every service that’s found to be a violation as well as a $100,000 civil fine for every relationship that’s found to be a violation. Additionally, Stark Law violations may open the door for criminal prosecutions under the Anti-Kickback Statute.

Rather than risk violations, prudent practitioners and health care institutions would be wise to implement proactive compliance programs that will allow them to evaluate any vulnerability they may have under the Stark Law as well as any self-reporting obligations that may exist. An experienced attorney specializing in health care law can be a valuable resource in helping set up a Stark Law compliance program.

In instances where a violation of the Stark Law may have occurred, it is important to consult with a health care attorney immediately. As noted above, the Affordable Care Act amended existing federal law to impose criminal penalties on payments that represent a conflict of interest. Such overpayments must be reported and returned within 60 days of the identification of the overpayment. The Center for Medicaid and Medicare Services has the right to decrease civil penalties for Stark Law violations when violations are self-disclosed.