Stark Laws

Stark laws, also known as physician self-referrals, provide a way for the government to prevent doctors from referring patients to individuals and entities with which they have a financial interest. The full collection of laws, rules and regulations has been growing for years. Running afoul of these laws comes with hefty penalties, with the possibility of fines or being excluded from participating in state and federal healthcare programs.

With more than a decade of experience representing licensed healthcare professionals, the attorneys at Norman Spencer Law Group have extensive experience with Stark laws. We not only defend clients against violation allegations, but we also consult with healthcare providers to ensure they are staying within Stark law parameters.

The full body of Stark laws includes The Stark Amendment to the Omnibus Reconciliation Act of 1989, along with a number of amendments and administrative rules and regulations. The Stark Amendment was implemented in three phases: Stark I, Stark II and Stark III.

• Stark I: This law initially only applied to doctors and their family members, prohibiting self-referrals to clinical laboratories in which they had a financial interest.
• Stark II: This amendment was introduced in 1993, and it expanded the law’s coverage beyond physicians and clinical labs. It prohibited doctors from making referrals to any individual or entity in which they had a financial interest.
• Stark III: The final phase of regulations, which went into effect in 2007, clarified and refined a number of matters that had been addressed in the second phase of the Stark II laws. Many were associated with issues pertaining to doctors in group practices as well as the relationships between doctors and hospitals.

Stark laws exist to prevent physician self-referrals, and some support the laws while others argue against them.

Those in favor of Stark laws say physician self-referrals could result in the over-utilization of healthcare services, which would increase healthcare costs. They also argue self-referrals create a referral system that is limited to those within a physician’s interests, thereby limiting competition from other providers.

Others say Stark requirements need to be relaxed, as doctors who invest in, operate or own healthcare facilities are responding to a need for services that would otherwise go unmet. They argue this particularly holds true in areas where fewer medical services are available.

They also point out that doctor-owned entities often present a lower-cost alternative to those located within hospitals. The higher cost is largely due to hospital overhead costs that must be passed down to services within their facility.

The large array of Stark regulations and statues were implemented by CMS, or the Center for Medicare and Medicaid Services. It is also the agency that continues to extend the reach of Stark by instituting regulations that expand the definition of “financial interest.”

Under the current definition, a “financial interest” extends to just about anything resulting in a financial benefit for the referring doctor. This can include financial incentives, gifts, ownership, reduced fees or rent, freebies, structured compensation arrangements – or anything else that may provide some type of financial gain.

Despite its huge reach, Stark laws do come with certain exceptions. If the doctor personally provides the referred services, or if he or she is an employee of a medical group that provides the service, it may be allowed within Stark parameters. This exception lets doctors engage in multidisciplinary practices, provided they meet the law’s definition of a physician in the group practice.

Healthcare professionals will also find exceptions to stark if they are referring to in-office ancillary services – as long as the office leasing arrangement is structured in a certain way.
A number of Safe Harbor Regulations outline additional exceptions to the law, with specific types of entities exempt from being included.

A lineup of other exceptions allow for certain service arrangements, such as rental of office space or employment arrangements with hospitals. The arrangements, however, must be at fair market value.

Determining if your situation falls into a Stark exemption or violation is an extremely complicated analysis that requires complete financial and operational disclosure. The fallout of making an incorrect determination can be disastrous. Consulting with one of the Stark law lawyers at Norman Spencer Law Group is an optimal way to ensure you make the proper determination.

Stark law violation penalties can be far-reaching and severe. They can include:

• Denial of payment for the services provided
• Civil penalties of up to $15,000 for each referred service, along with three times the amount the entity received from Medicare
• Exclusion from Medicare, Medicaid and other state programs
• Civil penalties of up to $100,000 for each attempt to circumvent the Stark law

For more details on Stark laws, or to ensure you are not inadvertently at risk, schedule a consultation with an attorney at Norman Spencer Law Group today.