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Physician Self-Referral (Stark) Law

Background

The federal self-referral prohibition (42 USC 1395nn), commonly called the “Stark law,” is one of numerous fraud and abuse laws that apply to physicians and limits the type of business relationships into which physicians can enter.

The Stark law gets its short-form name from the law’s chief sponsor, U.S. Rep. Fortney (Pete) Stark, Jr., D-Calif and was enacted in 1989.  Subsequently, the Centers for Medicare & Medicaid Services (CMS) and its predecessor the Health Care Financing Administration, codified regulations implementing the statute at 42 CFR 411.350, et seq.

The information contained in this website is provided for informational purposes only, and should not be construed as legal advice on any matter.

What Stark law prohibits

The Stark law prohibits a physician’s referral for certain designated healthcare services (DHS) to an entity if the physician (or a member of the physician’s immediate family) has a financial relationship with the entity, unless the referral is protected by one or more exceptions provided in the law.

DHS

DHS means any of the following services (other than those provided as emergency physician services furnished outside of the U.S.):

  • Clinical laboratory services.
  • Physical therapy, occupational therapy, and outpatient speech-language pathology services.
  • Radiology and certain other imaging 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.

Financial Relationships

The Stark law defines financial relationships to generally include ownership/investment interests and compensation arrangements between a physician (or a member of the physician’s immediate family) and an entity that furnishes DHS. Such arrangements and the associated financial relationships may be either direct or indirect. Understanding the nature of the financial relationship at issue is critical because it determines what, if any, Stark law exceptions are available.

Penalties and violations

The Stark law is a strict liability statute, which means proof of specific intent to violate the law is not required.

Sanctions for violations of the Stark law include the following:

  • Denial of payment – Medicare is prohibited from paying for DHS furnished pursuant to a prohibited referral.
  • Refund of payment – Any entity that collects payment for a DHS furnished pursuant to a prohibited referral must timely refund all collected amounts
  • Imposition of civil monetary penalties
  • Exclusion from federal healthcare programs -- Physicians and entities that violate the Stark law can be excluded from participating in the Medicare and Medicaid programs.

Stark Law Exceptions

Where a physician has a financial relationship with a designated health service entity, an exception to the Stark law must be complied with to permit physician referrals to that entity for the furnishing of designated health services. 

Click on the link below for information regarding exceptions organized by the type and nature of financial relationship involved:

Other federal laws and self-referral prohibitions

The Stark law should be distinguished from other federal laws directed at combating healthcare fraud and abuse, such as the Anti-Kickback Statute, False Claims Act, Exclusion Authorities, and the Civil Monetary Penalties Law.  Business arrangements permitted under the Stark law may nevertheless be subject to enforcement under other laws.

The Anti-Kickback Statute (42 USC 1320a-7b(b)) is a criminal law that prohibits the knowing and willful payment of remuneration to induce patient referrals or generate business involving any item or service payable by Medicare, Medicaid or other federal healthcare programs. The Anti-Kickback Statute imposes its own specific requirements, in addition to those originating from the Stark law and other federal fraud and abuse rules.

The False Claims Act imposes civil (31 USC 3729) and criminal (18 USC 287) liability on those who defraud government programs. It is illegal to submit claims for payment to Medicare or Medicaid that you know, or should have known, are false or fraudulent. The fact that a claim results a violation of the Anti-Kickback Statute or Stark law may also render it false or fraudulent, creating liability under multiple authorities.

State self-referral prohibitions impose separate restrictions on physician referrals to organizations with which a physician has a financial relationship.

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