Open Nav Close Nav

News / Blog

Stark Law Violations and Exceptions You Might Have Missed

Stark Law, also known as the Physician Self Referral Law, aims to protect patients from compromised medical referrals given to them by their physicians. Referrals are valuable in most fields, and a referral from a trusted medical source is all the more valuable for patients looking for the best medical care. This makes the system ripe for abuse by physicians who may see an opportunity to profit through the use of referrals.

What is the focus of Stark Law?

Stark Law is a group of laws that prohibits physicians from giving referrals of Designated Health Services (DHS) to their patients, payable by Medicare or Medicaid, that could lead to financial gain for the physician or their immediate family. This is meant to prevent self-interested physicians from abusing referrals and patient trust for financial gain. Ownership and Investments are included as types of financial interests a physician may have.

Is Stark Law a criminal statute?

Stark Law is a federal civil law and carries financial penalties if found guilty of a violation. It is a liability statute, meaning that intent isn’t necessarily needed for a person to be found in violation of the statute. What constitutes a violation of Stark Law starts with the act of referring a patient to a DHS that’s payable by Medicare. The types of Designated Health Services covered under Stark Law are:

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

While Stark Law itself isn’t a criminal statute, the financial penalties can get very serious, not to mention the stain on a practice or organization for having violated the statute. However, just because Stark Law doesn’t carry criminal penalties doesn’t mean there aren’t other laws and regulations that might. The Anti-Kickback Statute (AKS) is a criminal statute that prohibits compensation and kickbacks in exchange for referrals and there are others.

Stark Law Violations Examples

  • In June of 2022, 15 Texas doctors paid $2.83 million in a settlement after a Department of Justice investigation alleged they were in violation of AKS and Stark Laws. The DOJ alleged the doctors “received thousands of dollars in remuneration from nine Management Service Organizations (MSOs) in exchange for ordering laboratory tests.” It was alleged that in these remuneration instances, the companies used MSOs to pay the doctors for referrals and that the payments were disguised as investment returns.
  • In December of 2021, Flower Mound Hospital Partners LLC paid $18.2 million in a settlement after the Federal and State allegations of AKS and Stark Law violations. It was alleged that when the partly physician-owned hospital repurchased and resold shares, it “took into account the volume or value of certain physicians’ referrals when it (1) selected the physicians to whole the shares would be resold to, and (2) determined the number of shares each physician would receive.”
  • In August of 2014, the New York Heart Center paid over $1.3 million to settle allegations that it violated the False Claims Act and Stark Law by way of physician compensation.
  • In December of 2018, Aurora Health Care Inc. agreed to pay $12 million in a settlement after allegations that it violated the False Claims Act and Stark Law by sending claims to Medicare and Medicaid. The United States and Wisconsin alleged that Aurora had a compensation structure with two physicians that were not Stark Law compliant, then submitted claims to Medicare and Medicaid for services said physicians ordered.

Stark Law Exceptions

Since the introduction of Stark Law, there have been a number of waivers and exceptions made to accommodate different situations.

These range from more narrowly defined waivers that target specific states that have more specific laws surrounding their Medicare and Medicaid, to wider waivers that target the whole country. In December of 2018, a waiver was issued for some to use in Vermont as the state began its five-year program, All-Payer Accountable Care Organization Model Agreement. Other waivers that have been introduced include (but are not limited to) Healthcare Innovations Awards, Medicare Diabetes Prevention Program Expanded Model, and Medicare Shared Savings Program.

While Stark Law does prohibit referrals to DHS’s that the referring physician has some level of ownership of, it does make an exception for ownership of shares in publicly traded companies on the NASDAQ, NYSE, or comparable exchanges. The exception also is extended to ownership of shares in public companies through mutual funds. Other exceptions (with conditions required) include (but are not limited to) preventative screening tests and vaccines, eyeglasses/contact lenses following cataract surgery, and academic medical centers.

Speak to a Stark Law Attorney

Stark Law and other related statutes are complex and require careful interpretation. In order to avoid penalties that may damage the reputation of your practice, it is advisable to seek representation from a seasoned Stark Law attorney.

Whether you are currently in need of legal defense or are seeking a precautionary plan, the Fenton Jurkowitz Law Group can help with next steps. For more information on how your organization can benefit from hiring a Stark Law attorney, fill out our online contact form today.