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Stark Law

Stark Law - Physician Self-Referral

Health care organizations are required by law to adhere to complex federal and state regulations. While performing routine compliance audits, healthcare entities occasionally identify that they have unknowingly violated Stark Law. At the point of discovery, it is often too late to prevent penalties.

Stark Law Defense Attorney for Doctors

The Stark Law prohibits a doctor from referring to an entity for furnishing designated health services (DHS) where payment might be made under Medicare if the doctor, or family members, has a financial relationship with the entity providing the services. This law is probably one of the most complex areas of federal health care laws.

According to the Stark Law, a financial relationship could include ownership or financial interest with any designated health services entity.  

Perhaps some remuneration is exchanged directly between a referring doctor and the DHS entity without any middle people involved. An indirect financial relationship may include a physician and a DHS entity compensation arrangement. Either way, they are both violating the Stark law.

Put simply; the Stark law prohibits healthcare providers from referring Medicare patients for specific health services to a business in which the physician has a financial interest. Further, it prohibits billing Medicare or other insurance providers for health care services when an improper physician referral is made.

If you face penalties related to Stark Law infractions, this page from our federal criminal defense lawyers will help you navigate the regulatory hurdles of healthcare audits.

An Overview of the Stark Law

Stark Law — also known as the Physician Self-Referral Law — is a set of federal regulations found in Section 1877 of the Social Security Act. The law bans the self-referral of physicians in most cases.

Overview of the Stark Law

This means that with few exceptions, a physician cannot refer a patient to an entity with which they have an existing financial relationship.

Entities called Designated Health Services (or DHS) that fall under the purview of Stark Law are:

  • Clinical laboratories,
  • Therapy,
  • Hospital services (inpatient and outpatient),
  • Imaging (radiology),
  • Cancer and specialty treatment,
  • Pharmacies and prescription drug providers,
  • Medical equipment suppliers,
  • Physical therapy,
  • Hospice care,
  • Outpatient pathology services,
  • Radiology therapy services,
  • Prosthetic devices and supplies.

Medical professionals that are considered physicians bound by Stark Law include, but are not limited to:

  • Medical doctors,
  • Dentists,
  • Optometrists,
  • Chiropractors,
  • Surgeons, including dental.

Not only does Stark Law restrict the ability of a physician to refer for their financial gain, but it also extends to prohibit referrals that benefit the physician's immediate family. Immediate family members are considered:

  • Spouse,
  • Children and step-children,
  • Siblings and step-siblings,
  • Parents and step-parents,
  • In-laws,
  • Grandparents, grandchildren, and their spouses.

For the purpose of Stark Law, a prohibited financial relationship, ineligible for referrals, can include entities that the physician:

  • Has sole or shared ownership over,
  • Has invested in,
  • Has a compensation or remuneration agreement with.

What are the Penalties for Violations? 

Because Stark Law is regarded as civil law and not criminal, infractions of the law are penalized financially. These fines are scaled and can end up quite costly.

  • Up to $15,000 for each referral violating Stark Law,
  • Up to $100,000 if it is determined a scheme was devised to circumvent the law,
  • Refunding the money received for the referred service,
  • Denial of designated health service payments.

If the unlawfully referred entities make Medicare claims, the physician could face penalties that include:

  • Prohibition from using government healthcare programs (i.e., Medicare, Medicaid, etc.),
  • Reimbursement for three times the amount Medicare dispersed to the referred service,

What Are the Exceptions to the Stark Law?

The Department of Health and Human Services has the authority to create specific exceptions for referrals to entities that will not result in a conflict of interest.

Despite the extensive list of regulations under Stark Law, there are situations where physician self-referral would not be a violation. This includes instances in which:

  • The same physician personally provides the referred service,
  • The physician is an employee of a medical group that provides the referred service,
  • The referral was for an ancillary service provided in-office,
  • The physician holds a stake in a large, publicly traded company (allowed due to Safe Harbor regulations),
  • The patient lives in a rural area without significant medical options,
  • The financial relationship is due to the rental of office space,
  • The financial relationship is due to the rental of equipment,
  • Despite the referral being made for an immediate family member, the employment relationship is bona fide (genuine), and it's in the best interest of the patient.

This list is not exhaustive, and many of these exceptions include stipulations that make it even more challenging to determine whether or not a physician is violating the law.

With heavy financial penalties on the line, misinterpreting your situation regarding Stark Law can be a very costly mistake. The most effective way to avoid fines is to complete regulatory audits with the assistance of a lawyer.

Laws Related to the Stark Law

Stark Law is closely associated with the federal anti-kickback statute under 42 U.S.C. § 1320A-7B. Physicians found violating Stark Law may also be violating this law, meaning the two laws are often prosecuted simultaneously.

The Anti-Kickback Statute is a form of health care fraud that prohibits individuals using making money on the reimbursement received from federal health care programs.

A notable difference between this statute and Stark Law is that 42 U.S.C. § 1320A-7B is a criminal charge, meaning the offender could face up to 10 years imprisonment if convicted.  

Other statutes used in a Stark Law case include 18 U.S.C. § 1349 health care fraud and 18 U.S.C. § 287 false or fraudulent claims. Health care providers might receive a subpoena from the Office of Inspector General.

Contact our Professional Defense Team for Help

There are various compliance recommendations for any business that is seeking to follow the rules. These include creating a database of all healthcare employment contracts to ensure they meet the safe harbor provisions.

Federal Criminal Defense Lawyers at Eisner Gorin LLP

It would help if you also kept a detailed log of all possible conflicts of interest and properly documented all the payments between parties.

You should also train and update employees on Stark Law compliance and create internal policies that include discipline measures for infractions.

If you implement adequate compliance controls, you reduce the chances of violating this law. As noted above, the penalties for violating this law are harsh, even when the health care practitioner did so unintentionally.

We can help you in Stark Law investigations by the Department of Health and Human Services, the Office of Inspector General, and the Department of Justice.

The federal criminal defense law firm at Eisner Gorin LLP provides legal representation across the United States. You can contact us by phone or use the contact form for an initial case review.

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