20 Interesting Stark Law Facts

The Stark Law is one of the primary mechanisms the government utilizes to remove the financial incentive from physician’s referrals. In particular, the Stark Law prohibits a physician from making a referral to an entity for designated health services that are reimbursable by Medicare in the event the physician has a financial relationship with the entity. If the arrangement does meet an exception, the Stark Law does not apply. In any event, the Stark Law has resulted in settlements nearing $100 million and is certainly a law that healthcare organizations focus on. The following is a list of 20 Stark Law Facts:

1. The Stark Law or Stark Act is also known as the Physician Self-Referral Law; however the name of the law comes from a United States Congressman named Peter Stark. Peter Stark represented districts in California between 1972 and 2012.
2. In its original form, the Stark Law only applied to clinical laboratory services. As of 1993 this changes when observers believed it was necessary to extend the ban to other services.
3. The Stark Law is primarily a strict liability statute. This means that if an arrangement does not meet all of the requirements of an exception, the Stark Law has likely been violated.
4. It is important to remember that a “referral” of a “designated health service” is required for an arrangement to implicate the Stark Law. If neither of those are a part of an arrangement, the Stark Law is not implicated.
5. The Stark Law only applies to physicians. By Federal definition a physician is a MD, DO, DDS, DPM, Optometrist, or Chiropractor. The Stark Law does not apply to Nurse Practitioners or other Advanced Practice Nurses.
6. The nonmonetary compensation exception is believed to only apply to non-employed physicians. However, if a benefit is offered to an employed physician that is not a “normal” benefit, then such benefit may be outside of the standard employment exception thus requiring the use of the nonmonetary compensation exception.
7. The Stark Law actually governs the ways in which profits and productivity bonuses are distributed in private practices.
8. To resolve allegations from the Federal government stemming from alleged Stark Law violations, a small hospital in Kentucky paid nearly $41 million. Allegedly the hospital paid cardiologists too much compensation which impacted their medical decision making.
9. The Stark Law has multiple different penalties. First, there is a prohibition on seeking payment for services that violate the Stark Law. In other words, you should not bill for the services. Second, the Stark Law requires any amounts paid (patient deductibles and coinsurance, reimbursement from Federal health care programs) to be refunded. Finally, the government may still penalize organizations $15,000 per claim and treble (triple) damages.
10. Most people believe that the “fair market value” standard as used in the Stark Law is more financial than legal. Unfortunately, because fair market value is legally defined any opinion of fair market value would need to be actually legally defensible. Fair market value is currently defined as “the value in arm’s-length transactions, consistent with the general market value”.
11. The Stark Law only applies to “designated health services” whereas some people believe it involves any referral by a physician. In actuality, there are 10 different categories of designated health services that are applicable to the Stark Law.
12. One of the only Stark Law definitions that implicates a knowledge requirement is the indirect ownership interest definition. As a part of this definition, the designated health service entity must have actual knowledge or act in reckless disregard or deliberate ignorance of the fact that a physician has an indirect interest in the entity.
13. Oddly enough the Stark Law contains an exception that is solely specific to Puerto Rico. The exception relates to ownership or investment in hospitals by physicians in Puerto Rico. No other exception under the Stark Law specifically mentions a geographic location as a part of the specific requirements.
14. It is clear that the Stark Law does not directly apply to non-physicians such as nurse practitioners and physician assistants; however in a recent proposed rule CMS included an exception that covers remuneration paid to practice groups for the purpose of employing nurse practitioner or physician assistants.
15. Another lesser known civil monetary penalty that can occur for a Stark Law violation is the circumvention civil monetary penalty. In short, if an arrangement is created and developed for the purpose of circumventing the Stark Law, there could be a $100,000 penalty in addition to any other penalties.
16. The Stark Law not only applies to physicians directly, but also immediate family members of a physician. An immediate family member or member of a physician’s immediate family means husband or wife; birth or adoptive parent, child, or sibling; stepparent, stepchild, stepbrother, or stepsister; father-in-law, mother-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law; grandparent or grandchild; or spouse of a grandparent or grandchild. This means a physicians wife could not own a lab by herself because CMS views this as the physician husband owning the lab.
17. A referral under the Stark Law is extremely broad. For example, it can be a request by a physician for an item or service, a request by a physician for a consultation with another physician, or the mere establishment of a plan of care. Thus, any referrals extending from those examples would likely be considered a referral for Stark Law purposes.
18. Exceptions to the Stark Law are actually divided into various categories an for the most part may only be utilized in that category. For example, certain exceptions only apply to investments or ownership by a physician whereas others only apply to compensation arrangements with physicians. Finally, there are exceptions that may be used regardless of the category of the arrangement.
19. CMS is required to issue advisory opinions interpreting the Stark Law upon request. Unfortunately, CMS has issued very few to date unlike the Anti-Kickback Statute advisory opinions.
20. Although there as an emphasis on group practices within the Stark Law, many forget that the Stark Law still directly applies to solo practices. For example, a solo practice still must meet the applicable requirements under the in-office ancillary services exception.

The Stark Law is an extremely complex law and certainly a law that continues to develop over time. As noted in the list, CMS continues to issues changes to the Stark Law regulations. For more information and resources on the Stark Law, please visit our Stark Law Resource Page.