What is the Stark Law? And Why Is It Important to You?

It seems apropos that a US Congressman was named Pete Stark who first sponsored what came to be known as the Stark law, because the Stark law mandates stark penalties for financially driven physician referrals. Get it? Cheesy, I know.

The Stark law (42 U.S.C. 1395nn) prohibits physician referrals of designated health services (DHR) for Medicare and Medicaid if the physician has a financial interest with the “referred to” agency.

For example, Dr. Goneril is an internist. As an investment, he and his partner, Dr. Regan open a local laboratory “Gloucester” and hire Mr. Lear to run Gloucester. Drs. Goneril and Regan are silent partners. Dr. Goneril orders blood work on Patient Cordelia and refers her to Gloucester.

The above example would be a direct violation of the Stark law.

The penalties are severe. If caught, Dr. Goneril would have to repay all money received for services in which he referred Cordelia to Gloucester. In addition, he could be penalized $15,000 for every time he improperly referred Cordelia, plus three times the amount of improper payment he received from the Medicare/caid program, possible termination from the Medicare/caid program, and penalties of up to $100,000 for every time he tried to circumvent the Stark law.

On the federal level, the Department of Justice, the Center for Medicare and Medicaid Services (CMS), and the Department of Health and Human Services (DHHS) are tasked with enforcing the Stark law.

Recent years have seen the most Stark law violations since its inception and it is only being enforced more and more.

On June 9, 2015, the Office of Inspector General (OIG) issued a fraud alert regarding the Stark law. Investigations since June 2015 has risen significantly.

Here are some recent Stark settlements (for you to understand the severity):

  • Adventist Health System agreed to pay $118.7 million to the federal government and to multiple states.
  • Columbus Regional Healthcare System is paying $25 million.
  • Citizens Medical Center in Victoria, Texas, agreed to pay $21.75 million.

“O, reason not the need! Our basest beggars / Are in the poorest thing superfluous. / Allow not nature more than nature needs, / Man’s life’s as cheap as beast’s.” (King Lear, II, iv).

How do you defend yourself if you are accused of a Stark violation?

First and foremost, hire a qualified health care attorney. There are exceptions to the Stark law which, hopefully, you fall within. Furthermore, there are multiple legal arguments that can abate penalties. You do not always want to settle.There have been a number of agencies, that recently, decided to never settle. Oddly enough, the number of their audits decreased. Maybe the government targets easy money.

About kemanuel

Medicare and Medicaid Regulatory Compliance Litigator

Posted on April 13, 2016, in "Single State Agency", Administrative Remedies, Appeal Rights, Audits, CMS, DHHS, Doctors, Federal Government, Federal Law, Final Rulings, Gordon & Rees, HHS, Knicole Emanuel, Laboratory Services, Lawsuit, Legal Analysis, Legal Remedies for Medicaid Providers, Legislation, Medicaid, Medicaid Attorney, Medicaid Audits, Medicaid Providers, Medicare, Medicare Attorney, Medicare Audits, NC, North Carolina, Office of Medicare Hearings and Appeals, Physicians, Primary Care Physicians, Prosecution, Regulatory Audits, Stark Law and tagged , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , . Bookmark the permalink. 2 Comments.

  1. Please address the problem of Hospitals referring almost all of the Home Medical Equipment a patient needs when discharged by the Hospital to an HME Company they own?
    Thank You,

    Arnold Britt
    President
    Carolina Apothecary
    Main: (336) 394-1100
    Mobile: (336) 613-2408
    Fax: (336) 394-1110
    abritt@carolinaapothecary.com
    http://www.carolinaapothecary.com

    • Good question, Arnold. There are ways to legally craft a safe harbor contract between two entities. Experienced and savvy attorneys in know how. I’ve done it myself.

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