The Physician Self-Referral Act (“Stark Law”)

i-medicalinsurancefraudThe Physician Self-Referral Act (“Stark Law”), 42 U.S.C. § 1395nn [Social Security Act § 1877].

The “Stark Law” prohibits physicians from referring Medicare and Medicaid patients to a hospital or other entity for the furnishing of certain “designated health services” if the physician (or immediate family member) has a financial relationship with the hospital/entity. Likewise, the hospital or other entity generally may not present, or cause to be presented, a claim for payment to Medicare or Medicaid for services furnished pursuant to a prohibited referral.

The Stark Law broadly defines prohibited financial relationships to include any “compensation” paid directly or indirectly to a referring physician. The Stark Law applies to referrals of Medicare patients by physicians with a prohibited financial relationship to the provider of certain “designated health services” including:

(1) clinical laboratory services
(2) physical therapy
(3) occupational therapy
(4) radiology services
(5) radiation therapy services and supplies
(6) durable medical equipment and supplies
(7) parenteral and enteral nutrients, equipment and supplies
(8) prosthetics, orthotics and prosthetic devices and supplies
(9) home health services
(10) outpatient prescription drugs
(11) inpatient and outpatient hospital services
(12) outpatient speech-language pathology services. 42 U.S.C. § 1395nn(h)(6)

There are exceptions to the Stark Law that identify specific transactions that will not trigger its referral and billing prohibitions.

These exceptions include:
(1) certain bona fide rental of office space and equipment
(2) certain bona fide employment relationships
(3) certain personal service arrangements
(4) remuneration unrelated to one of the designated health services
(5) physician recruitment
(6) isolated transactions
(7) certain group practice arrangements with a hospital
(8) certain payments by a physician to a laboratory for clinical laboratory services or to an entity for items or services provided at fair market value. 42 U.S.C. §§ 1395nn(b) through (e).

The Stark Law is a strict liability statute so, unlike the Anti-Kickback Law, where non-compliance with a safe harbor provision does not automatically constitute a violation, all of the elements of the Stark Law exceptions must be met to avoid running afoul of the law. Violations of the Stark Law may subject the physician and the billing entity to exclusion from participation in federal health care programs and various financial penalties, including:

(a) a civil monetary penalty of $15,000 for each claimed service which the physician or entity knew or should have known was in violation of Stark, and up to $100,000 where the principal purpose of the arrangement was to generate improper referrals
(b) an assessment of three times the amount claimed for a service rendered pursuant to a referral the entity knows or should have known was prohibited.
42 U.S.C. §§ 1395nn(g).