Stark Law

The United States prohibits the payment of kickbacks and other remuneration to doctors based on referrals in order to ensure that payments made under Medicare and Medicaid are based on the physician’s medical judgment rather than their compensation.  If you have information about a physician receiving compensation for their referrals in violation of the Stark Law, our whistleblower attorneys can help you report it to the U.S. Government through the False Claims Act.  For a free, confidential legal consultation, contact us by calling 1-800-590-4116 or online via our contact form.

The Stark Law limits physician referrals of patients insured by the federal government for designated health services (defined broadly to cover a variety of medical services including inpatient and outpatient hospital services, home health services, outpatient prescription drugs, durable medical equipment, clinical laboratory services and occupational and physical therapy services) when the doctor has a financial relationship with the entity.  The law is aimed at ensuring patient referrals are medically necessary and not influenced by the money that the doctor might receive as a result of the recommended patient services.

Stark Law History

The Stark Law was named after Representative Pete Stark (D-CA), who sponsored the initial bill in Congress. The original bill, frequently known as Stark I, covered only referrals of clinical laboratory services. Congress passed the law in 1989 and it became effective in January 1992.

In 1993, Congress passed the Omnibus Budget Reconciliation Act of 1993 (OBRA 1993), which extended the Stark Law to prohibit other services, which became known collectively as the Designated Health Services. This extension has come to be known as Stark II, and went into effect in 1989.

The Centers for Medicare and Medicaid Services (“CMS”) has engaged substantive rule making under Stark II five times now, with the last still under consideration. These rulemaking efforts have come to be referred to as Phases I, II, III, IV and V.

Phase V was proposed in 2015, and has been called the most significant changes to the physician self-referral law since 2008.

Stark Law Enforcement

The Stark Law, which is also known as the Physician Self-Referral Law, provides for civil monetary penalties, including a $15,000 penalty for each service and a $100,000 civil money penalty for each circumvention scheme. Physicians are also required to refund any money received while in violation of the law.

A violations of the Stark Law may also be a violation of the False Claims Act. The FCA allows the U.S. Government to recover funds paid out because of false claims or false statements. A defendant that has violated the FCA may be held liable for treble damages as well as a fine per claim.

The False Claims Act offers rewards to whistleblowers, known as relators, of between 15 and 30 percent of the amount recovered because of their information. If the U.S. intervenes in the lawsuit, the individual may receive between 15 and 25 percent of the recovery. If the relator pursues the litigation on behalf of the U.S. Government after the Justice Dept. has declined, the relator earns between 25 and 30 percent of the ultimate recovery.


How Does the Stark Law Differ from the Anti-Kickback Statute?

The Anti-Kickback Statute is a criminal statute similar to the civil Stark Law. The Anti-Kickback Statute prohibits payment of anything of value to induce or reward referrals of Federal health care program business. It is broader than the Stark law in that it applies to referrals from anyone for any items or services. It is not limited to physicians or designated health services. However, a violation of the law must be intentional (knowing and willful). There are also voluntary safe harbors in the law similar to the mandatory exceptions of the Stark Law.

Stark Law Exceptions

There are a number of exceptions to the broad ban on self-referrals in the law. These include exceptions for same group practice physician services, in-office ancillary services and prepaid plans, among others..

Bona Fide Employment Exception

An employer may pay a physician compensation if the remuneration is reasonable, consistent with fair market value, and determined through arm’s length negotiations.  The compensation may not take into account the volume or value of referrals from the physician and must be commercially reasonable even if no referrals are made.  An employer can require referrals from an employee if the compensation is set in advance, for fair market value, and meets various other requirements, such as the agreement is in writing and signed by the parties.

Investment Interest Exception

There is not a financial relationship between a physician and an entity if the physician owns (1) publicly traded securities in qualified stocks and bonds, (2) appropriate mutual funds and (3) certain specific providers such as a rural laboratory or a Puerto Rico hospital.

In-Office Ancillary Services

This exception allows physicians to make referrals within their own practice (to themselves or another physician in the same group practice) if they are in the same building or a centralized building used by the group practice to provide services.

There are numerous other exceptions to the broad ban on self-referrals in this law. Before reporting a Stark Law violation as a whistleblower, it is important to have a complete legal analysis to ensure it does not fall within one of the many exceptions.

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