It is essential for healthcare providers to understand the Stark law, 42 U.S.C. §1395nn (Stark), a critical regulation that impacts the practices of all CMS participating physicians. Stark protects patients and taxpayers from fraud and abuse by preventing financial incentives from influencing physicians’ medical decision-making and promoting fair competition in the healthcare industry. On January 30, 2023, the Biden administration announced its intent to end the national health emergency declarations on May 11, 2023. With the end of these declarations, the blanket waivers of the sanctions imposed for violating the Stark law related to COVID-19 that C.M.S. issued in March 2010 will also end.
Stark Law: The Basics
The Physician Self-Referral Law, commonly known as Stark, prohibits physicians from referring patients for designated health services (DHS) to entities in which the physician or an immediate family member has a financial interest.1 Stark further prohibits a healthcare entity from presenting or causing to be presented claims to Medicare for DHS furnished under a prohibited self-referral.2
Stark is a strict liability law which means a defendant is liable for violating the statute regardless of whether they knew what they were doing was illegal. The Stark regulations establish many exceptions or “safe harbors” to the Stark prohibition, including for various types of physician investment and compensation arrangements, provided the structure satisfies all the elements of the applicable safe harbor.
Upon the request of CMS or the OIG (Office of Inspector General), an entity that provides DHS covered by Medicare or Medicaid must report physician investment, ownership, and compensation information. This information can include the names and NPIs (National Provider Identifiers) of the physicians and their immediate relatives the entity has a financial relationship with, in conjunction with details of the ownership, investment, and compensation arrangements.
Stark violations can result in severe penalties. Potential sanctions include denial of reimbursement, refunding Medicare and Medicaid paid claims, civil penalties of up to $15,000 per billed claim for DHS arising from a prohibited arrangement, a civil penalty of up to $100,000 and exclusion for schemes to circumvent Stark, and a maximum fine of $10,000 per day for any delay or omission of required reporting relating to the sanction section of Stark.3 In addition to these penalties, Stark violations can violate the Anti-kickback Statute and the False Claims Act.
Recent Stark Law Prosecutions
What does a violation look like in practice? Frequently settlements occur before a Stark law prosecution proceeds through the court system, but settlements are often made public by the Department of Justice. For example, in 2022, BioReference Laboratories and their parent company OPKO Health, Inc., agreed to pay $9.85 million to resolve allegations that BioReference paid above-market rents to physician landlords for office space to induce referrals from those physicians to BioReference.4
When a Stark prosecution proceeds, it often takes the form of a qui tam action in which a private citizen brings an action against a person or company on the government’s behalf and shares in any recovery obtained. In U.S. ex. rel. Bartlett v. Ashcroft, former senior officers of a Pennsylvania hospital filed a qui tam action against physicians and the physician-owned imaging company. The suit alleged that for a year, the physicians referred over 8,000 patients to the hospital for inpatient services and other DHS. In return, the hospital paid the referring physician-owned imaging company $410 per scan. Those payments were then distributed to the physician owners. The district judge found that this scheme violated Stark law, and the case continued to work through the federal system.
What Were the Blanket Waivers?
On March 30, 2020, CMS issued blanket waivers of the Stark penalties and sanctions retroactive to March 1, 2020, for arrangements to furnish DHS solely related to “COVID19 Purposes,” including diagnosis, medically necessary treatment, securing other physicians’ services, and overall to enable positive public health outcomes. So long as a “COVID-19 Purpose” was met, physicians and entities were not subject to prosecution for what otherwise constitutes prohibited conduct.
A few examples of conduct CMS deemed covered by the blanket waivers included: a hospital paying physicians above their previously-contracted fair market value rate for furnishing professional services for COVID19 patients in particularly hazardous or challenging environments; lending money to a physician practice that provided exclusive anesthesia services at the hospital to offset lost income resulting from the cancellation of elective surgeries to ensure capacity for COVID-19 needs; or a physician referring a Medicare beneficiary to a home health agency owned by an immediate family member of the referring physician because there were no other home health agencies with the capacity to provide the medically necessary service to the beneficiary during the pandemic.
Effective May 11, 2023, none of the waivers will be available to protect these arrangements, regardless of whether they have a COVID-19 purpose. Consequently, any physician and entity with a financial relationship must either reform the contract to satisfy a Stark safe harbor or end it.
Conclusion
The Stark law aims to prevent fraudulent activities, such as overutilization of services, unnecessary procedures, and kickbacks, promote fair competition and prevent conflicts of interest in the healthcare industry. Understanding the Stark law and the AntiKickback Statute is critical for healthcare providers to avoid potential violations and protect patients and taxpayers from fraud and abuse. Compliance with these regulations promotes fair competition and ensures physicians base clinical decision-making on clinical judgment rather than financial incentives. Healthcare providers must stay current on changes to these regulations and seek legal guidance if they have questions or concerns about compliance.
Jay L. Phillips is a business and compliance attorney with Sturgill, Turner, Barker & Moloney, PLLC. He can be reached at jphillips@sturgillturner.com or 859.255.8581. This article is intended to be a summary of state or federal law and does not constitute legal advice.