Stark Law - What You Need to Know

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With all of the complex laws governing healthcare, doctors worry about running afoul of the law, even accidentally. Frankly, they should. One subject that causes confusion is physician self-referral. This term refers to the practice of a physician referring a Medicare or Medicaid patient to a facility or certain kinds of ancillary services in which he/she has a financial interest (http://starklaw.org/). If a doctor refers a patient to an imaging center that he/she owns, for example, that can be a violation of Stark Law.

What is Stark Law ?

Stark Law is similar to anti-kickback legislation. However, anti-kickback legislation applies to everyone who gives or gets any financial inducement for a patient referral, while Stark covers only physician self-referrals. In contrast to anti-kickback laws, which require improper intention, Stark is also a strict-liability law. This means that “You can have no wrongful intention and still violate the law,” notes Harry Nelson, the Managing Partner of Nelson Hardiman, LLC in Los Angeles.

Stark Law is the result of Congress’s worries about:

• Conflicts of interest
• Increasing healthcare costs due to over-utilization of services
• Limited competition from a captive referral system

Doctors, however, had a different perspective. They viewed limitations on their ability to choose where to send patients as government interfering in medicine. There was also concern that restricting self-referrals would discourage doctors in medically under-served areas from investing in much needed facilities (http://starklaw.org/).

A Stark Law violation involves strictly civil, rather than criminal, penalties. Stark Law violations are a basis for False Claims Act liability as well as significant civil monetary penalties. Physicians face fines of “up to $15,000 per item or service,” notes Mr. Nelson. For employers of physicians, the penalties become massive. A federal judge ordered Tuomey Healthcare System in Sumter, SC to pay $237 million in fines related to violations of Stark Law and the False Claims Act (http://www.beckershospitalreview.com/legal-regulatory-issues/5-things-to-know-about-the-tuomey-healthcare-case.html).

How Doctors Can Protect Themselves

There are ways to avoid Stark Law penalties. First, “If you identify overpayment and refund it within 60 days,” a doctor avoids liability. Second, there are a number of exceptions, such as in-office ancillary services. Doctors who self-refer imaging or lab tests to an outside facility that they own or that pays them compensation risk potential liability for violating the Stark Law. The Patient Protection and Affordable Care Act (PPACA) now requires doctors to offer “a list of alternative suppliers in the area where the patient resides” for MRI, CT, or PET scans, even if the same doctor has the ancillary services in-office.

Hospitals and other employers of physicians need to make sure that physician compensation structures are appropriate and in-line with fair market value. The government alleged Halifax Hospital Medical Center and Halifax Staffing of Daytona Beach, Florida, violated the Stark Law by paying three neurosurgeons more than fair market value (http://www.beckershospitalreview.com/legal-regulatory-issues/10-largest-false-claims-stark-law-and-anti-kickback-settlements-of-2014.html). They ended up agreeing to pay fines for this violation of Stark Law.

For physicians and employers of physicians, excellent legal advice is key. It is important to know whether an arrangement meets the Stark Law’s definition of “commercial reasonableness.” Physicians also need to examine investment proposals carefully. “Doctors are often more trusting with one another. They are more on-guard against questionable arrangements presented by marketers, but less discerning about problematic offers from physicians or healthcare facilities,” notes Harry Nelson.

It is critical to be mindful of and comply with Stark Law. With improvements in analytics, Medicare and Medicaid agencies can detect with increasing ease unusual patterns of patient referrals to a specific facility. Physicians and medical practices need to establish procedures to avoid violating Stark Law because, according to Harry Nelson, right now “It happens all the time.”

Author’s note: Nothing in this article should be construed as legal advice. Always speak to an attorney who is a healthcare specialist. Special thanks to Harry Nelson of Nelson Hardiman, LLP for his insights into this matter.