What Is Stark Law?
The Stark Law (42 USC 1395nn) is a federal civil statute that bars a physician from referring a patient for designated health services payable by Medicare to an entity with which the physician, or an immediate family member, has a financial relationship unless an exception is satisfied, and bars that entity from billing for services furnished on a prohibited referral.
- Work from the actual requirements of that exception rather than a generic contract rule, because term length, writing and signature requirements differ between them.
Stark Law
Also known as: Physician Self-Referral Law; 42 USC 1395nn; Stark
The Stark Law (42 USC 1395nn) is a federal civil statute that bars a physician from referring a patient for designated health services payable by Medicare to an entity with which the physician, or an immediate family member, has a financial relationship unless an exception is satisfied, and bars that entity from billing for services furnished on a prohibited referral.
Definition
Stark is a strict-liability civil statute: the prohibition applies whether or not anyone intended to break it. Its scope is narrower than it is often described. 42 CFR 411.353 provides that a physician with a direct or indirect financial relationship with an entity “may not make a referral to that entity for the furnishing of DHS for which payment otherwise may be made under Medicare”, and that an entity furnishing designated health services on a prohibited referral “may not present or cause to be presented a claim or bill to the Medicare program or to any individual, third party payer, or other entity” for them. Designated health services are the categories listed at 42 CFR 411.351, and that same definition states that “the term ‘designated health services’ or DHS means only DHS payable, in whole or in part, by Medicare”. Medicaid is reached through a different mechanism — a federal financial participation provision in the Social Security Act — rather than by the referral prohibition itself, and the distinction matters when scoping an arrangement. Consequences include denial of payment and refund obligations, civil monetary penalties whose amounts are adjusted for inflation, and potential exclusion; read the current amounts from CMS rather than from a figure quoted on a web page. The regulatory exceptions at 42 CFR 411.355 to 411.357 protect arrangements such as in-office ancillary services, bona fide employment, personal service arrangements, fair market value compensation and rental of office space — each with its own elements, and each satisfied only when every element is met.
Example
A physician who holds an ownership interest in an imaging center and refers Medicare patients there has a financial relationship that brings the referral within the prohibition unless an exception — the in-office ancillary services exception, for instance — is satisfied element by element. An immediate family member’s ownership of a DME supplier creates the same kind of relationship. Whether a specific arrangement fits a specific exception is a legal analysis of that arrangement’s facts and documents, and nothing on this page substitutes for it.
Common Misconceptions
Stark is strict liability, so a good-faith arrangement is not a defense and every element of an exception has to be met. Two further distinctions get blurred. The prohibition runs to designated health services payable by Medicare, whereas the Anti-Kickback Statute is an intent-based criminal statute reaching all referral sources and all federal health care programs. And writing and signature requirements are exception-specific rather than universal: 42 CFR 411.354(e) provides that a writing requirement “may be satisfied by a collection of documents, including contemporaneous documents evidencing the course of conduct between the parties”, and that where an arrangement otherwise fully complies with an exception, the parties may obtain the required writing or signature “within 90 consecutive calendar days” of the date it was required. A term of at least one year is a requirement of particular exceptions, not a rule that applies to every arrangement.
Practical Application
Inventory every physician financial relationship — employment, ownership, leases, medical-director and other service agreements — and have counsel map each one to the specific exception it is meant to satisfy, element by element, with the fair market value support documented. Work from the actual requirements of that exception rather than a generic contract rule, because term length, writing and signature requirements differ between them. Where a problem is found, the CMS Self-Referral Disclosure Protocol exists as a route to resolve it; what a disclosure produces in any given case depends on the facts and on CMS, so treat the decision to disclose as a legal one taken with counsel rather than as a predictable reduction in exposure.
Related Terms
Anti-Kickback Statute
The Anti-Kickback Statute (42 USC 1320a-7b(b)) is a federal criminal law prohibiting the knowing and willful offer, payment, solicitation, or receipt of any remuneration to induce or reward referrals of items or services payable by a federal health care program.
Read definitionFalse Claims Act
The False Claims Act (31 USC 3729-3733) is a federal law imposing civil liability on a person who knowingly submits, or causes to be submitted, a false or fraudulent claim for payment to the U.S. government. The statute provides for a civil penalty per claim, adjusted annually for inflation, plus three times the government’s damages.
Read definitionWhere This Applies on MedPrecision
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