The Stark Law (a.k.a. the Physician Self-Referral Law), is a civil law that prevents physicians from referring patients to businesses where they have a financial interest. As with the federal Anti-Kickback Statute (AKS), Stark only applies to patients and services reimbursed by federal healthcare programs such as Medicare and Medicaid. Stark also prohibits billing Medicare or other insurance providers for services when an improper referral is made, such as an unnecessary diagnostic test. “Physicians” include MDs, DOs, Dentists, Chiropractors, Optometrists, and Podiatrists.
In addition to all these elements, Stark only applies to what the federal government refers to as “Designated Health Services” (DHS). If the physician does not refer patients for at least one of the DHS on the list, no Stark violation has occurred. The following are the DHS that could trigger Stark:
- Clinical laboratory services;
- Physical therapy services;
- Occupational therapy services;
- Radiology services;
- Radiation therapy services;
- 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.
These categories are broad and encompassing in and of themselves, and it is important to note that specific regulations and exceptions apply to each category.
The following must occur to constitute a Stark violation:
- A physician makes a referral;
- The referral is for DHS that is reimbursed by a federal healthcare program;
- The referral is to an entity with which the physician or an immediate family member has a financial relationship.
For example, a physician who owns a separate x-ray lab and refers a patient to that lab for an x-ray would violate the Stark law – even if the x-ray was medically necessary and valid. Stark also prohibits physicians from referring to DHS facilities that are owned by an immediate family member, which includes the following: spouses, parents, children siblings, in-laws, and grandparents.
Background
The Stark law, named after Congressman Pete Stark (who sponsored the law), was passed in reaction to significant fraud, waste, and abuse of federal healthcare dollars. Shortly after CMS began reimbursing for certain DHS, some physicians opened stand-alone facilities to profit from this. CMS expenditures dramatically increased overnight because many dishonest physicians sent nearly all their patients for unnecessary tests just to increase revenue at their side business. When the federal government discovered this, it enacted the Stark law. This law not only works to prevent subjecting patients to unnecessary tests and other DHS, but it also prevents fraud, waste, and abuse of taxpayer dollars.
Exceptions
As with AKS, Stark has several exceptions that make certain activities legal that would otherwise violate the law. The Office of Inspector General for Health and Human Services (OIG) has made these exceptions to accommodate certain business arrangements that have a low likelihood of fraud, waste, or abuse. However, these exceptions can be very complicate and difficult to navigate legally. If you think you have a healthcare business that could potentially fall under one of these exceptions, let us to find out for you.
Penalties
Unlike the AKS, the Stark law is a civil statute, not a criminal one. Therefore, intent is irrelevant. If an inappropriate referral is made, the physician is guilty! Nevertheless, a Stark violation will result in significant fines and other monetary penalties. Fines can be up to $15,000 per service that violates the law, or up to $100,000 for each scheme to circumvent the law. In addition, charge and convictions under Stark can trigger the federal Civil Monetary Penalties law and can result in exclusion (debarment) from participating in federal healthcare programs, as well as denial of payments for the services that violated Stark.
State Law
In addition to the federal Stark law, many states have their own anti-referral laws. These vary widely and can be difficult to fully understand. For example, California’s version of Stark is called the Physician Ownership Referral Act (PORA) and applies to a few different Designated Health Services. It can be triggered for services paid for by Medicare, commercial payors, and even cash-pay patients. New York’s law also prohibits unlawful referrals for any type of payor, but it goes further. A medical provider who collects any amount under an illegal referral system is jointly and severally liable to the payor. Also, a provider can lose her license if convicted. Some states have no referral prohibitions, while others just defer to the federal Stark law.
Be sure to contact us to help figure out these state and federal laws and avoid illegal referral arrangements.