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Stark Law for Healthcare Providers

By Brandy Brimhall
December 13, 2017

Healthcare providers need to be aware of several different fraud and abuse laws. Most are aware of the False Claims Act and the Health Care Fraud statute. Another important one to pay attention to is the Physician Self-Referral Law, also known as the Stark Law. In some industries it is legal to reward those who refer business to you; however, in federal healthcare programs, paying for referrals is illegal.

The Stark Law is a federal law governing referrals for services or supplies which are payable by government entitlement programs such as Medicare, Medicaid, and CHAMPUS. This law prohibits providers from referring patients for "designated health services" (DHS) to any “entity” with which the physician (or an immediate family member) has a “financial relationship", unless an exception applies (42 U.S.C. § 1395nn(a)(1)(A)). As such, if you don’t participate in ANY Medicare, Medicaid, or related government healthcare services, you’re not likely at risk of a Stark Law violation.

It is important to note that almost every state has a law against self-referrals, so in many referral-related scenarios where Stark may not be a concern to your organization, it is critical to be concerned about state regulations regarding this matter. State regulations may mirror many of the regulations included in the federal Stark Law and may be even more stringent. Seeking the guidance and information from your local state association or board as well as a qualified health care attorney may be extremely beneficial. Multi-disciplinary practices tend to be at greater risk and are therefore more vulnerable in relation to Stark and other self-referral laws.

There are a few limited exceptions to Stark Law regulations, but they are very restricted and providers would be wise to consult an attorney before entering into such an arrangement. One of these limited situations is the "per-click arrangement" which is discussed below.

Regarding the federal Stark Law specifically, even if your practice cares for beneficiaries of federal entitlement programs as defined above, there are only 11 types of services commonly referred to as "designated health services," which Stark addresses. If you don't provide those services, it is likely that you may not need to be concerned with a Stark violation. These services include the following:

  • clinical laboratory services
  • physical therapy services
  • occupational therapy services
  • radiology (including magnetic resonance imaging, computerized axial tomography scans, and ultrasound services)
  • radiation therapy services and supplies
  • durable medical equipment and supplies
  • parenteral and enteral nutrients, equipment, and supplies
  • prosthetics, orthotics, prosthetic devices, and supplies
  • home health services
  • outpatient prescription drugs
  • inpatient and outpatient hospital services

2017 CHANGES

The 2017 Medicare Physician Fee Schedule (PFS) rule included updates and clarifications regarding the Stark Law. These apply to per-click arrangements and the services/supplies included in the "Designated Health Services (DHS)" list.

  • Per-click arrangements: These are unit-based equipment leases or service rental agreements (arrangements) between the lessor (referring physician) and the lessee (organization renting the equipment). The charges are tied to the amount the equipment is actually used (unit-based/per-click) rather than a set agreed-upon amount. CMS emphasized that the prohibition on per-click charges is not absolute. It only applies “to the extent that such charges reflect services provided to patients referred by the lessor to the lessee.” Because this statement is not “absolute”, in order to ensure compliance, be sure to consult an attorney if you have such arrangements currently in place or if you plan to enter into such an agreement.
  • Services/supplies: Certain services and supplies are not restricted by Stark Law and the current list of codes which are “DHS” is found on the CMS website (See References). Note that the following are excluded:
    • dialysis-related drugs furnished in or by an end-stage renal disease facility
    • preventive screening tests
    • immunization or vaccines

As a reminder, there may be specific state guidelines similar to Stark that may be applicable to you. Be safe, do NOT assume that Stark Law does not apply to you. Learn all you can about Stark and state-specific self-referral laws in order to ensure compliance.


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