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What are the Basics of the Stark Law?

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Basics Stark Law

The medical field is highly regulated. That is no surprise to you. But what may come as a surprise to some medical professionals is that they could be making illegal referrals.

The restriction on referrals can be a challenge for physicians practicing in a group practice or clinic where some owners overlap. Under the Stark Law, it could be illegal for a doctor to refer a patient to an overlapping facility.

The Stark Law

The Stark Law prohibits doctors from making a Medicare or Medicaid referral for designated health services to their own or another medical practice if the referring doctor has a financial relationship with the other entity. This federal law makes it illegal for a wide range of medical relationships to exist. Although the Stark Law is intended to reduce the likelihood of a doctor or medical professional recommending additional services where they receive compensation, in reality, the law can affect a patient’s ability to receive proper medical care.

Penalties for violating the Stark Law are harsh. Physicians may be barred from participating in the Medicare and Medicaid programs. They may also face financial penalties up to $100,000 per illegal referral. The Stark Law applies only to referring physicians.

Designated Health Services

Under the Stark Law, referrals for designated health services are illegal if the referring physician has a financial interest in the entity where they referred the patient. This referral ban may include such designated health services as:

  • Laboratory services
  • Physical therapy
  • Occupational therapy
  • Speech language therapy
  • Radiology and other imaging services
  • Radiation therapy
  • Durable medical equipment and supplies
  • Prosthetics, orthotics, and prosthetic devices and supplies
  • Home health services
  • Outpatient prescription drugs
  • Inpatient hospital services
  • Outpatient hospital services

When a physician makes a referral for any of the medical services listed above, they could be violating the Stark Law. The worst part is that they may not even know they are violating the law. That is why it is important for any physician to ensure that they have qualified Stark Law legal advice coming from a lawyer who has experience and knowledge of the nuances of this federal law.

Strict Liability for the Stark Law

Strict liability is a legal theory for application of laws. Under strict liability, if a person has committed the crime, they are guilty, regardless of their intent. The most common example of strict liability is a speeding ticket. The police pull over a person who was speeding down the road. The person was speeding and gets a ticket. It does not matter whether the person intended to speed or even knew they were speeding. The mere fact that they were speeding is enough to be guilty.

The same approach is true for the Stark Law. When a physician makes a referral for health services that violates this law, it does not matter if the referral was accidental or the doctor did not know of the violation; they are subject to penalties under the law. For doctors who do knowingly violate the Stark Law, the penalties may be even more severe.

Stark Law Exceptions

As with most laws, the Stark Law has many exceptions that may apply to physicians and doctor’s offices. Some of the biggest exceptions are listed below.

In-office ancillary services exception. A group medical practice is able to refer a patient internally for medical services. This frequently includes laboratory or radiology services that the doctor’s office already provides. For ease of use and for expediency for the patient, this type of internal referral is allowed.

Fair market compensation exception. The fair market compensation exception allows physicians to have written agreements with other doctors and medical facilities. These agreements must state a timeframe for services and the cost for each service. The cost must be a fair market value.

Indirect compensation exception. A doctor can receive compensation for a referral as an exception to the Stark Law. The compensation must be of fair market value, cannot take into account the value or the number of referrals the physician provides, and must be provided for in a written agreement.

Non-monetary exception. A doctor can make a referral and receive compensation of up to $300 per year. This exception applies when the physician did not explicitly solicit the compensation and the amount provided to the referring physician does not account for the volume of referrals.

Safe harbor. The exceptions above and other exceptions not noted here mostly follow the safe harbor theory. Under a safe harbor exception, both parties must have signed a written agreement specifying the terms and conditions of their relationship and their commercial agreement. Any implied, informal, or handshake agreement will probably not qualify as a safe harbor exception.

To qualify as a safe harbor exception, the following items must usually be met:

  • The referring party and the party receiving the referral must have a written agreement in place signed by both parties.
  • The written agreement must provide for a term of at least one year.
  • The agreement must also list the specific services, equipment, or property that will be used.
  • The agreement must list the fees for any services, equipment, or property being used, and it must be of a fair market value.

Without each of these items above, a referring physician may not be able to claim a safe harbor exception to the Stark Law. Even if the physician did not know they were violating the law or took steps they thought were going to provide an exception to the law, they may still be responsible for their actions and subject to penalties.

Federal Enforcement of the Stark Law

To deter this type of financial activity, the federal government has been fierce in charging and punishing violators of the Stark Law. Because the federal government is taking aim and because the punishment for violations can cripple a medical practice, it is vital that physicians and medical facilities take proactive steps to ensure they are compliant with these federal regulations.

Finding and working with a trusted legal advisor can help keep physicians out of legal trouble. Because of the severity of the penalties and because physicians may be violating the Stark Law without knowing it, having competent legal advice is paramount to avoiding costly and embarrassing fines.

Anti-Kickback Statute

The Stark Law is similar to the federal anti-kickback statute. Both laws govern improper referrals, but there are several key differences for which medical professionals need to be aware:

  • The Stark Law only imposes civil penalties, whereas the anti-kickback statute applies both civil and criminal penalties for violations.
  • The Stark Law is more limited in scope because the anti-kickback statute applies to any federal health care program, as opposed to the Stark Law, which only applies to Medicare and Medicaid.
  • Intent is required for a violation of the anti-kickback statute but is not for the Stark Law.
  • The Stark Law must include a referral relationship between a physician and a medical facility, whereas the anti-kickback statute applies to any referral source.

Philadelphia Physician Lawyers at Sidney L. Gold & Associates, P.C., Help Protect Your Practice

As a health care professional, you frequently refer patients to other doctors and medical facilities for care. But the Stark Law makes you question how and where you make those referrals. You need to be ready for an investigation if there is an allegation that you have a financial interest in a referral you make. To help guide you, the Philadelphia physician lawyers at Sidney L. Gold & Associates, P.C., stand ready to help you. Contact us online or call us at 215-569-1999 for a free consultation. Located in Philadelphia, we serve clients throughout Wilkes-Barre, Scranton, northeast Philadelphia, Bucks County, Chester County, Delaware County, and Montgomery County.

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