The Stark Law: a basic overview of a complex statute

For a physician, navigating regulation and compliance is vital to operating a successful practice. By adhering to the correct legal guidelines, you can alleviate much of the anxiety and risk that comes with a failure to comply. Certain laws and regulations--such as the Stark Law--carry strict penalties as they deal with Medicare and Medicaid. A better understanding of laws like these can go a long way to running a legally sound practice.

For its part, the Stark Law is a statute aimed at preventing kickbacks through the use of federal health care programs. Essentially, it dictates that a physician cannot refer Medicare or Medicaid patients for "designated health services" to entities--or immediate family members--with which they have financial ties. While the Stark Law is complicated and riddled with exceptions, there are a few basic elements to be grasped at the outset.

What does the Stark Law prohibit?

At its core, the Stark Law two things:

  • A physician can't refer Medicare or Medicaid patients for designated health services to another entity that they hold an immediate family relationship or financial interest with.
  • If an illegal referral takes place, the receiving entity cannot bill Medicare or Medicaid.

The primary function of the Stark Law is to discourage physicians from seeking kickbacks via federal programs. While the language is somewhat vague, it's critical to understand that both "financial interests" and "designated health services" come with detailed, nuanced definitions.

What constitutes a Stark Law violation?

If you find yourself in a situation where you're unsure of whether or not you're in violation of the Stark Law, ask yourself these questions:

  • Are you dealing with a referral--on either end--that involves a Medicare or Medicaid patient?
  • Is the patient's referral for a designated health service?
  • Is there a financial relationship between yourself and the other party in the referral?

An affirmative answer to all three could point to a violation of the Stark Law, but you should note that the statute comes with nearly 20 exceptions for types of referrals and financial relationships. If you're at all unsure about the status of your practice and Stark Law compliance, consulting with a legal professional with a strong health background could be wise.

Violating the Stark Law can mean stiff penalties

If you do violate the Stark Law, you could find yourself in the throes of some harsh punishments. The penalties can include fines of up to $15,000 for each illegal referral, restitution for wrongfully paid claims and a $100,000 civil penalty for circumventing the law. It's also possible that your practice could face exclusion from Medicare and Medicaid.

While its goal of decreasing fraud is a focused one, the Stark Act itself can be broad in scope, and it does not require bad intent to be prosecuted. For those reasons alone, it's worth keeping abreast of its particulars.

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