Stark Law Examples Simplified: Who it Protects And Where it Applies

Navigating medical issues and the confidential nature of medical histories is complex. Patients know they have rights, and they are counting on the medical professionals they see to respect those rights. 

The Stark Law, however, is a long-standing piece of legislation that still causes confusion for patients. The decades-old law, which has had numerous expansions added, is designed to provide a level of protection to both patients and their healthcare providers. 

Though laws for medicine can be complex, we’ve distilled the essentials of the law, which should be helpful for any medical professional explaining what the Stark Law is to a patient. 

The Stark Law: An Overview

The Stark Law, which is officially known as the Physician Self-Referral Law, was first introduced in 1989 as part of the Omnibus Budget Reconciliation Act.  It protects patients from unethical or unnecessary medical referrals and ensures that healthcare service providers get paid fairly for their work.

The Stark Law is made up of three primary parts: 

• The Anti-Kickback Statute 
• The False Claims Act
• The Federal Civil Monetary Penalties Law

Each of these laws works in concert to prevent any kind of kickback, or payment for referrals of patients from one provider to another. 

The Stark Law applies to any healthcare service provider (physicians, hospitals, nursing homes, etc.) that receives reimbursement from a Medicare or Medicaid program. The law also applies to any organization that provides services related to these programs. For example, laboratory and imaging facilities are subject to the Stark Law.

In addition to protecting patients and their wallets from unethical medical care, the law also helps to prevent fraud and abuse by preventing any form of financial incentives for referrals or unnecessary medical tests or procedures.

What are Designated Health Services?

Outlining specifics for the application of the Stark Law is a proactive step to determining real-time examples and clarifying any sticking points for those who have careers in medicine. 

Designated health services (DHS), for the purposes of the Stark Law, are divided into 12 service categories: 

1. Radiology and imaging
2. Radiation therapy
3. Inpatient and outpatient hospital
4. Clinical laboratory
5. Occupational therapy
6. Outpatient speech-language pathology
7. Physical therapy
8. Home health services
9. Outpatient prescription drugs
10. Durable medical equipment 
11. Prosthetics, orthotics, and prosthetic devices 
12. Parenteral and enteral nutrients and equipment

The Stark Law also identifies supplies related to the above-mentioned categories as DHS. 

A Stark Law example of an illegal kickback you might not consider is a situation where a tenant has a payment arrangement involving a service that can be covered by Medicaid that is part of the rental agreement. 

This arrangement is illegal despite the practice not having Medicaid patients and offering a service not covered by Medicare. 

Definitions and Exceptions

Navigating the Stark Law can be challenging, partly due to updates via addendums since it was originally introduced. 

A few of the noteworthy changes included: 

• The addition of anti-kickback provisions in 1977 and an expansion of that in 1987
• The addition of a Safe Harbor provision in 1992
• Self-referral regulations (for rehabilitation and other services), which became effective Jan. 4, 2002 but were originally released as part of legislation in 1993 

The law also defines what individuals are considered immediate family members. 

Per Stark Law specifications, the following are members of a physician's immediate family:  

• Husband, wife, or child
• Stepchild
• Birth, adoptive,  or stepparent 
• Sibling, stepbrother, or stepsister 
• In-laws (father, mother, son, daughter, brother, or sister) 
• Grandparent or grandchild, and spouse of a grandparent or grandchild

Understanding and adhering to the exceptions (when relevant) is critical to achieving Stark Law compliance. Certain ownership/investment interests and agreements and compensation arrangements are considered exempt from the Stark Law. This is a topic best discussed with legal professionals to determine the likelihood of exemption. 

Meanwhile, employees at a medical practice can be exempt from the Stark Law if: 

• A physician supervises their actions
• The services are provided in the same building with non-designated services
• The billing is completed by the physician

Examples of Stark Law Violations

Stark Law violations are recorded and published by legal entities in an effort to deter other medical facilities from engaging in similar behaviors. Below are some examples of violations and the required financial agreements related to case resolution.

Kickback Violations

In June 2022, 15 doctors in Texas agreed to pay settlements related to violations of the Anti-Kickback Statute and Stark Law. These doctors allegedly received remuneration from nine management service organizations (MSOs) that were identified as investment returns. However, the funds were related to doctor referrals. 

In total, the doctors involved in this case will pay over $28 million to settle the allegations. 

In a case in 2021, athenahealth agreed to pay over $18 million related to kickbacks issued to help generate sales of its electronic health records (EHR). Three marketing programs were run that offered kickbacks, from all-expense-paid trips to the Kentucky Derby and New York Fashion Week to monetary rewards to physicians that signed up for programs. The payments were made with no requirements related to spending time with patients or having patients become members of athenahealth. 

False Claims Act Violation

Wheeling Hospital in West Virginia agreed to pay $50 million in 2020 for violating Stark Law. In addition, an employee who raised concerns and was fired filed a lawsuit under the False Claims Law. The employee received a $10 million reward as a result, and management reform was initiated at the hospital as a result. 

The case alleged physicians at Wheeling Hospital were being paid above market value and also based on a number of referrals, while billing sent to Medicare included services that were not provided to patients. 

In a case in Indiana in 2019, a whistleblower received $612,000 for uncovering the alleged fraud. The case found that Rialto Capital Management LLC acquired a hospital and directed the hospital to offer loans to two doctors based on referrals they made. There was no effort to collect on these loans, which was considered a violation of Stark Law and AKS. 

Stark Law Examples Clarify Sticking Points

The Stark Law has been amended and had provisions added since it was originally introduced in 1989. With that in mind, it makes sense that simplifying an idea of violations and exceptions can be tricky. 

Stark Law examples of cases where a doctor or institution reached a settlement can help clarify certain aspects of the law and include provisions. Each case helps expand the understanding of the law’s application. 

Discussions Can Help Clarify Lingering Concerns

If you are still unclear on specific aspects of referrals to a hospital or potential violation of the False Claims Act, now is the time to reach out to the experts at 99MGMT. Avoid legal repercussions by taking action today.