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Understanding the Stark Law

stethoscope sitting on a bed

The Stark Law guides physicians to practice their profession with integrity. It allows you to avoid incurring fines by steering clear of unlawful self-referrals in the medical industry. It’s vital to develop a comprehensive understanding of the Stark Law.

Keep reading to learn the Stark Law definition, how it developed over the years, and what Designated Health Services (DHS) are. Find out how important the Stark Law is and how it is classified by the U.S. government. Explore the consequences of violations and the Stark Law exceptions. Finally, discover how legal assistance lets you understand and follow the Stark Law.

Stark Law Definition

The Physician Self-Referral Law — the Stark Law — refers to Section 1877 of the Social Security Act (the Act) (42 U.S.C. 1395nn). The Stark Law is defined as a set of regulations that prohibit the self-referral of physicians under federal law. It imposes limitations on any financial and business transactions physicians may become involved in.

The main Stark Law principles are:

  • It prohibits physicians from making DHS referrals payable by Medicare to an entity that they or their immediate family members have a financial relationship with, like ownership, investment, or compensation. Note that there are certain exceptions to this law.
  • It prohibits the entity from presenting claims to Medicare or for referred services. It also forbids the entity from billing another person, entity, or third-party payer.
  • It establishes certain exceptions by giving the Secretary authority to make regulatory exceptions for financial relationships that do not involve risk of program or patient abuse.

Under the purposes of the Stark Law, the following medical professionals are considered physicians: medical doctors, osteopathy, optometry, dental medicine, dental surgery, podiatric medicine, plus chiropractors.

Immediate family members are individuals directly related to physicians. These include spouses, parents, children, siblings, stepparents, stepchildren, stepsiblings, in-laws, grandparents, grandchildren, spouses of grandparents, and spouses of grandchildren.

How the Stark Law Developed

The Stark Law was first enacted in 1992, according to StatPearls. It initially applied to physician referral for clinical laboratory services and later expanded in 1995 to cover designated health services. The rule was proposed to revise the regulations to encompass more DHS services, and the Medicaid expansion was finalized in three phases in 2001, 2004, and 2007.

Designated Health Services (DHS)

According to the Centers for Medicare & Medicaid Services (CMS), the following services are covered by the Stark Law under the DHS category:

  • Inpatient/outpatient hospital services
  • Clinical laboratory services
  • Home health services
  • Physical therapy services
  • Occupational therapy services
  • Radiology and other imaging services
  • Outpatient speech pathology services
  • Durable medical equipment and supplies
  • Radiation therapy services and supplies
  • Prosthetics, orthotics, and prosthetic devices and supplies
  • Parenteral and enteral nutrients, equipment, and supplies
  • Outpatient prescription drugs

Stark Law Importance

The U.S. Department of Health and Human Services Office of Inspector General (OIG) includes the Stark Law as one of the five most important federal fraud and abuse laws applying to physicians. The other laws include the Anti-Kickback Statute (AKS), False Claims Act (FCA), Exclusion Authorities, and Civil Monetary Penalties Law (CMPL).

The OIG, CMS, and Department of Justice were granted the authority to enforce these laws.

Civil Law or Criminal Statute?

The Stark Law is considered a federal civil law — not a criminal statute. Violations are categorized as non-criminal charges, but they can lead to higher amounts of financial penalties compared to a criminal statute like the AKS.

Consequences of Stark Law Violations

There are serious repercussions for physicians and entities who do not follow the Stark Laws. The American Society of Anesthesiologists (ASA) explains that these are some of the consequences of Stark Law violations:

  • Civil penalties up to $15,000 for each service rendered in violation of the law
  • Civil penalties up to $100,000 for every circumvention scheme against the law
  • Three times the amount of the improper payment the business received from the Medicare program
  • Refund of payments received by physicians and healthcare facilities
  • Denial of DHS payments
  • Exclusion from Medicare, Medicaid, and other state healthcare programs

Stark Law Exceptions

There are certain exceptions to the Stark Law. These include arrangements where the physician receives essential, non-monetary remuneration exclusively used to send and receive electronic prescription information. Another exception is the temporary moratorium on physician referrals to particular specialty hospitals where the physician has an ownership or investment interest.

More examples are the Bona Fide Employment Exception, In-Office Ancillary Services Exception, and Whole Hospital Exception. Note that you should comply with various requirements for each exception to be valid. Otherwise, you may be charged with a violation to the law.

Understand the Stark Law With the Help of Legal Experts

Even with the best intentions, there is still a possibility that you could violate the Stark Law if you don’t understand its implications.

If you need the guidance of legal experts, connect with us, so we can help you and your healthcare team follow the Stark Law consistently. Our team is prepared to increase your knowledge and understanding of the Stark Law definition and Stark Law exceptions to protect your medical practice.