What is the Stark Law in healthcare? How to avoid? (2023)

It goes without saying that physicians have an obligation to provide the best healthcare services to patients by adhering to service payment structures. This simply means that the services provided already have a set of rules that healthcare providers, both private and hospitals, must follow. Although Stark's Law has defined the professional ethics of healthcare providers, some physicians still do not know what Stark's Law is in healthcare.

It is federally regulated legislation that prevents physicians from referring or referring patients for a medical condition to another physician or to a healthcare facility that has a direct financial relationship with the physician. Stark's law is also known as thatThe doctor's law of self-reflection.

Introduced in the late 1980s, the law initially reflected only its restrictions on referrals for laboratory services, but later expanded to include all other healthcare services financially linked to a doctor. Later in today's article, the discussion focuses on the consequences of violating Stark's law and how Stark's law is explained.

What is Stark's Law in Health - Elements to Consider

To understand the specifics of Stark's law, it is necessary to consider the basic elements that make Stark's law applicable in the healthcare sector. First, the Stark Act limits a doctor's referral ability, which you can use to apply for a Medicare plan that keeps a patient with a business or facility that has a direct financial relationship with the doctor. Second, the Stark Act prevents insurance providers from accepting Medicare claims for services provided through a referral related to a physician's financial benefit. Third, under the Stark Act, there are exceptions to Bullets 1 and 2 which give the Secretary of State for the Department of Health and Human Services the power to create referral exceptions for healthcare professionals to facilitate referral processing and avoid conflicts of interest between healthcare professionals and Industry.

On the other hand, when these exceptions are regulated by the Department of Health, they become difficult for many. However, these exceptions only apply to patients with Medicare coverage, which is primarily used to treat elderly patients. The federally regulated Stark Act is designed to implement this exception, which is designed to protect unnecessary testing and treatment for people with disabilities, handicaps, or the elderly. These people are more prone to health complications and easy for doctors to spot and take advantage of.

Following these trials, inpatient and inpatient laboratory and treatment services were defined to limit services and facilitate follow-up. The federal government has provided a categorized process for referred Medicare patients to a healthcare facility through the designation of healthcare facilities.

Federal Designated Services for Stark Law

What is the Stark Law in healthcare? How to avoid? (1)

Centers for Medicare & Medicaid Services– CMS has listed certain healthcare providers and companies as the following or a combination of some of the services listed below;

  • clinical laboratory services
  • Durable medical device accessories
  • Home care
  • occupational therapy services
  • physiotherapy services
  • outpatient medication
  • Outpatient and inpatient care
  • outpatient speech therapy
  • Enteral and parenteral devices, consumables and nutrients
  • Radiation Therapy Supplies and Services
  • Scans, radiology and related imaging services
  • Orthoses, prostheses and prosthetic devices and accessories

The services mentioned are the only ones available under the Stark Act exception. This means that referring services to any of these areas of healthcare facilities may be considered a violation of the Stark Act or physicians who refer those services will not be penalized.

Does the Stark Act allow medical referrals to any center?

Stark Law makes all referrals to the healthcare facilities listed above, but also under Medicare and Medicaid insurance. Simply put, the Stark Act does not apply to services and patients who are not covered by Medicare or Medicaid or are paying for out-of-pocket healthcare services.

In addition, there are also exceptions for referrals of health services to a provider who is a member of an institution, e.g. B. an academic medical center, office equipment services (e.g. blood glucose meters and wheelchairs, etc.) and clinical laboratory services. .

Stark Law possible penalties for violations

Healthcare professionals who are licensed and accredited by Medicare and Medicaid insurance must strictly follow the rules outlined in the Stark Act. Registered physicians can face severe financial and professional penalties for violating the law. Suppliers should be aware that even if they are found to be unknowingly involved in violations of the law, they are liable. Even if the infringement case goes to court and no liability is found for a vendor's involvement, the vendor will still be penalized for reprimands.

However, the definition of liability can vary, since it depends directly on the constellation of claims. The strict law states that if the court finds a provider's involvement in the wrongful referral from the licensed health center during your service, the court holds the provider liable by determining whether the provider was aware of your financial interests. Here it is sufficient if the court can prove intent to make profit in order to make the provider liable for the cause.

In this scenario, if a provider, healthcare facility, or private practice is found guilty, they must, as punishment, send all financial proceeds from improper referral fees to the court along with $15,000 for the intended referrals. Not only will you be fined, but the affected practice or hospital will be removed from all government healthcare programs and facilities, and from future healthcare programs.

In addition to these penalties, the facility or provider is more likely to face civil penalties if the evidence shows intent and knowingly improper reprimands are made. A civil penalty for each improper reference violation is a total of $100,000.

In such cases, the hospital where the service provider worked will be subject to a civil fine. This is because the employer is accredited in CMS and federal health programs. However, when the care provider is directly involved, the court often expands the decision, blaming the hospital and doctor for the likely penalty. Additionally, these penalties and violations are not grounds for termination of a provider's or hospital facility's license. Both can continue to work for health care, but are not reimbursed by federal programs.

Severe penalties for real-time practitioners

What is the Stark Law in healthcare? How to avoid? (2)

Amedisys Hausgesundheit

Amedisys Home Health Fallshowed an unusual example of the violation of Stark's law150 million dollarsYou were paid to solve the case. The facility was involved in unnatural healthcare billing for Medicare from 2008-2010. It was later revealed that the false claims were made intentionally for financial gain by referring patients to potential healthcare companies and facilities for testing and laboratory services.

Baldwin Bone Articulation Case

The case was proven wrong by claiming health care benefits not only for Medicare but also for another state-regulated health program, Tricare (a health care program for veterans and families). During the case, Baldwin claimed that the contractors were hired as part of the facility and the services fall under the Stark Act. However, they were proven to have misled the court and held them liable for the willful and improper provision of services to unlicensed persons on the premises. To solve the case, shePaid $1.2 millionand was removed from future federal health programs.

How to avoid breaking Stark's law

There are several recommendations that can be applied to a healthcare facility to avoid violating Stark's law. The facilities must;

  • Build and track a database of vendors who have contacted other vendors
  • Keep records of conflicts of interest between providers and patients.
  • Document all necessary payment transactions
  • Train employees on updated Stra Law guidelines and rules to avoid present and future complications
  • Update and maintain documentation as the facility grows.
  • Take disciplinary action to comply with Stark laws, develop and implement internal policies

The Stark Act's Safe Harbor clause states that upon employment, a facility must enter into a contract with a healthcare provider. The contract must;

  • Have at least one year of seniority
  • Signed and documented by those involved with the organizers
  • Documented a fair market wage that prevents suppliers from breaking the law.
  • List of set of services and list of responsibilities that a provider must follow during its service management
  • No tying of a provider's salary to large or small patient numbers
  • Manufactured under the rules of Stark Law.

final remark

With all of the information mentioned in the article, it should be clear that any violation of Stark's law can have serious financial implications for both the hospital and the provider, whether directly, indirectly, intentionally, or otherwise involved in the practice . This can only be avoided by adhering to Stark's law.

Related article:

  1. Data Mining in Healthcare: What Are the Benefits?
  2. Does performance-based healthcare improve patient care?
  3. What is DRG in healthcare and what is DRG denial?


How do you avoid Stark Law? ›

To protect your organization against Stark law violations, you must ask newly-hired physicians to report any potential conflicts of interest. Physicians should complete a conflict of interest questionnaire upon hiring and then again at least once a year thereafter.

What are exceptions to the Stark Act? ›

Certain outpatient prescription drugs identified on HCFA's website (updated annually) that are EPO and other dialysis-related drugs and are administered in or by an ESRD facility are exceptions to the Stark law prohibition.

What 5 elements must exist for a Stark Law violation to occur? ›

In order for a relationship to implicate Stark, five basic elements must be present: (1) a physician must make (2) a referral for the furnishing of (3) designated health services payable by Medicare (4) to an entity (5) with which he/she (or an immediate family member) has a financial relationship.

What is an example of Stark Law violation? ›

An example of a Stark law violation is a hospital paying doctors money to refer cardiac patients to their hospital. Similarly, it is a violation of Stark for a laboratory or outpatient clinic to pay hospitals to refer patients to them.

Which of these is one of the three main parts of the Stark Law? ›

Three main concepts of Stark's ban on physician self-referral include: (1) physician referral; (2) DHS; and (3) financial interest. All three concepts must be implicated in order for Stark to apply to a given situation.

Who is the Stark Law meant to protect? ›

The Physician Self-Referral Law, commonly known as the Stark Law, and the Anti-Kickback Statutes are two federal laws that protect whistleblowers and prohibit a wide range of conduct by healthcare providers.

What are the three groups of Stark exceptions? ›

CMS added three new Stark value-based exceptions: the full financial risk exception, the meaningful downside financial risk exception, and the value-based arrangements exception. The first two require parties to take downside risk to qualify for the exception, while the third does not.

What is the objective of the Stark in law? ›

The Stark Law is a public service law that prohibits practitioners from making improper referrals when there is a conflicting financial interest. The law aims to protect the Medicare population from an overprescribing of unnecessary medical services.

Which of the following statements describes the Stark Law? ›

In essence, the Stark Law does the following: It prohibits a physician from making referrals for certain designated health services payable by Medicare to an entity with which he or she (or an immediate family member) has a financial relationship (ownership, investment, or compensation), unless an exception applies.

What is the Stark law in simple terms? ›

The Physician Self-Referral Law, commonly referred to as the Stark law, prohibits physicians from referring patients to receive "designated health services" payable by Medicare or Medicaid from entities with which the physician or an immediate family member has a financial relationship, unless an exception applies.

What is an example of the Stark law? ›

Nine (Expensive) Stark Law Violation Examples
Sep 12, 2022

What are technical violations of Stark law? ›

Technical violations or noncompliance, including documentation issues. Forgetting to sign a contact or allowing a contract to expire without renewal. Accidentally omitting elements of a legal exception from agreements. Failure to conduct business in accordance with the written agreement.

Which of the following are exception under Stark? ›

Vaccines, immunizations, and screening tests are generally allowable Stark exceptions provided they aren't given too often. The tests must be covered by Medicare.

What is the original intent of the Stark Law? ›

The Stark Law was enacted by Congress in 1989 as the Ethics in Patient Referrals Act. The initial intent was to prohibit physicians from referring Medicare patients to clinical labs in which the physician had some financial relationship, including an ownership interest.

What is the difference between Stark Law and Anti Kickback? ›

The Anti-Kickback Law covers referrals for all services from anyone including physicians or pharmaceutical companies. Conversely, the Stark Law is for referrals from physicians only and covers a set list of “Designated Health Services” (DHS).

Why is it called the Stark law? ›

The law is named after United States Congressman Pete Stark, who sponsored the initial bill in 1989.

Who is primarily responsible for enforcement of the Stark law? ›

The department of justice, CMS, and the department of health and human services oversees the enforcement of the Stark law.

What is the Stark law quizlet? ›

THE STARK LAW. Prohibits a physician from referring Medicare patients. for designated health services to an entity with which. the physician (or immediate family member) has a. financial relationship, unless an exception applies.

When did the Stark Law become effective? ›

When the Stark Law was enacted in 1989, healthcare was paid for primarily on a fee-for- service basis. Since that time, Medicare and the private market have implemented many value-based healthcare delivery and payment systems to address substantial cost growth in the current volume-based system.

What is the difference between safe harbor and Stark Law? ›

This safe harbor requires no assumption of downside risk by parties to a value-based arrangement. The Stark Value-Based Arrangements exception protects physician compensation arrangements that qualify as value-based arrangements, regardless of the level of risk undertaken though the arrangement.

Is Stark Law strict liability? ›

The Stark Law is often referred to as a “strict liability” law, because even an unintentional violation triggers the prohibition on Medicare payment. Noncompliance over a long period of time can result in large overpayment liability.

In what situation is a written agreement not required under Stark? ›

Unlike independent contractor arrangements, employment contracts are not required to be written; the compensation need not be set in advance; and the compensation may be amended at any time.

What harm does the Stark Law aim to prevent? ›

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.

What is the Stark Law and ethics? ›

The ethics in patient referrals act, enacted in 1989, is also known as the Stark Law. It is named after former Rep Fortney “Pete” Stark (D-CA), who was the sponsor of the law in Congress. The goal of the Stark Law was to prevent physicians from self-referring patients for their own financial gain.

What is the importance of Stark II to healthcare providers? ›

Stark II prohibits a physician or immediate family member who has a direct or indirect financial relationship with an entity from making referrals to that entity to provide designated health services (DHS) payable by Medicare or Medicaid, unless an exception applies.

What is the Stark Law also known as and why is it important to hospitals quizlet? ›

What is the Stark Law also known as and why is it important to hospitals? Physician self-referral law: The law also covers services billed by hospitals actually provided by a physician-owned entity under contract with the hospital.

How does the Stark Law impact physicians quizlet? ›

How does the Stark Law impact physicians? The Stark Law prohibits a physician from referring a patient for certain "designated health services" to an entity with which the physician has a "financial relationship." In addition, a provider may not bill Medicare for a claim based upon a prohibited referral.

What is Stark designated health services? ›

Designated health services means any of the following services that are payable, in whole or in part, by Medicare: clinical laboratory services; physical therapy, occupational therapy, and outpatient speech- language pathology services; radiology and certain other imaging services; radiation therapy services and ...

What protocols should be used by providers when disclosing a stark violation? ›

Stark- only conduct should be disclosed to CMS through its Self-Referral Disclosure Protocol (SRDP), which can be found at: http://www.cms.gov/PhysicianSelfReferral/.

Which of the following are examples of a technical violation? ›

Technical violations are those that occur when a probationer fails to complete one or more conditions of probation, such as abiding by curfew, meeting with a probation officer, getting a job, not buying firearms, or going to a substance abuse or domestic batterer's program.

Which of the following are questions used to determine if the Stark Law has been violated? ›

An entity may have violated the Stark Law if "yes" is answered to which of the following questions? Is the referral for a "designated health service"?. Has a physician or their family referred a medicare or medicaid patient to an entity?.

What is personal services exception to Stark? ›

The personal services exception is one of the most widely utilized Stark Law Exception. Specifically, this exception is typically utilized when a health system contracts with an individual physician as an independent contractor or with an entire group.

What is an example of kickback in healthcare? ›

Penalties for Kickbacks in Healthcare

It's simple to define what kickbacks in health care are. If a physician or medical provider uses any payment or compensation to encourage a patient to come to their office, or to encourage another medical provider to refer patients to their office or facility, that is a kickback.

Is the Stark Law outdated? ›

Since the Stark Law was enacted in 1989, the regulations implementing it have become woefully outdated. Too often, they have hindered, rather than advanced, the cause of affordable, quality health care for patients.

In what situations is a written agreement not required under Stark? ›

The agreement must be commercially reasonable even if no referrals were made to the employer. Unlike independent contractor arrangements, employment contracts are not required to be written; the compensation need not be set in advance; and the compensation may be amended at any time.

What happens if the Stark Law is violated? ›

The Stark law prohibits the submission, or causing the submission, of claims in violation of the law's restrictions on referrals. Penalties for physicians who violate the Stark law include fines as well as exclusion from participation in the Federal health care programs.

Is Safe Harbor an exception to the Stark Law? ›

This safe harbor requires no assumption of downside risk by parties to a value-based arrangement. The Stark Value-Based Arrangements exception protects physician compensation arrangements that qualify as value-based arrangements, regardless of the level of risk undertaken though the arrangement.

Who enforces Stark? ›

The department of justice, CMS, and the department of health and human services oversees the enforcement of the Stark law. Recent enactment and amendments to the Patient Protection and Affordable Care Act and the False Claims Act have led to more stringent applications.

Which conditions can make an agreement invalid? ›

A contract is invalid if any of the following conditions apply: The terms of a contract specify the illegal activity. One of the parties to which the agreement relates doesn't have legal capacity (is mentally incapable of entering into a legally binding agreement).

Why the Stark Law is necessary? ›

The Stark Law guides physicians to practice their profession with integrity. It allows you to avoid incurring fines by steering clear of unlawful self-referrals in the medical industry. It's vital to develop a comprehensive understanding of the Stark Law.

What is an example of False Claims Act in healthcare? ›

Examples of false claims include billing for services not provided, billing for the same service more than once or making false statements to obtain payment for services.


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