Physician Self-Referral Law limits physician referrals

The Physician Self-Referral Law, commonly known as the  Stark Law, places restrictions on physician self referrals for Medicare and Medicaid patients. The legislation, found at 42 U.S.C. § 1395nn, is named for Congressman Peter Stark, who sponsored the bill. A self referral is regarded as a physician making a referral to a medical facility with which the physician has a financial relationship.  This includes ownership , investment, or a compensatory arrangement with a medical facility.

The law is designed to prevent conflicts of interest and overutilization of services, both of which may act to drive up healthcare costs by preventing competition in the market place.  It became effective in 1992 under the Omnibus Budget Reconciliation Act of 1989 (ORBA 1989), was updated in ORBA 1993, and again in 1997.

Stark Law and Anti-kickback Statute

The Stark Law and federal Anti-Kickback Statute are similar in that they intended to prevent anyone from making or receiving payments to induce referrals for federal healthcare programs.  However, the Anti-Kickback Statute prevents anyone, not just physicians, from making self referrals for any federal healthcare programs, not just designated health services like Medicare and Medicaid.  Another key difference between the Stark Law and Anti-Kickback Statute is that the Anti-Kickback Statute requires the prosecution show that the defendant had a knowing and willful intent to break the law. The prosecution does not need to prove intent to prevail on a Stark Law claim, but intent may be required in order to recover certain monetary penalties. In other words, the Stark Law is a so-called “strict liability” offense and may be violated without any intent to do so and ignorance is not a defense.

Sanctions and penalties for violations of the Stark Law (Physician Self-Referral Law) include:

  • No Medicare/Medicaid billing for services rendered under illegal referral agreement: an health care company or physician providing services covered under Medicare or Medicaid that came about due to a referral prohibited under the Stark Law is prohibited from billing Medicaid/Medicare for those services.
  • Pay back Medicare/Medicaid payments received under illegal referral arrangement: the Stark Law provides that payments received for a prohibited self-referral must be refunded.
  • Denied payments: Medicare or Medicaid will refuse to pay for designated health services that were provided in violation of the Stark law.

Violators of the Stark Law may face criminal penalties of $25,000 in fines per violation and a five year prison sentence.  Civil penalties may be brought forward under the False Claims Act on behalf of the government and collect fines of three times the kickback received, a $50,000 fine for each violation, and an exclusion from federal healthcare programs like Medicare and Medicaid. Violators of the Physician Self-Referral Law may also be required to refund any overpayments.

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