Stark Law Examples: Who it Protects And Where it Applies

Trust is a big part of every patient-provider relationship. People want to know their doctors are making choices based on care – not financial ties. That’s what the Stark Law aims to support. It helps create a space where decisions are made in the patient’s best interest.

But the law itself isn’t always easy to explain. It’s been around for decades and has undergone several changes, which can leave both patients and providers unsure about what’s allowed.

We’ve outlined clear Stark Law examples, definitions, and exceptions to help make this complex topic easier to understand – both in conversation and practice.

What the Stark Law: A Practical 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.

While it’s often mentioned alongside the Anti-Kickback Statute and the False Claims Act, the Stark Law is a separate statute. Each law targets different aspects of healthcare fraud and abuse:

• The Stark Law prohibits certain self-referrals for designated health services (DHS) under Medicare and Medicaid.

• The Anti-Kickback Statute addresses the exchange of anything of value in return for referrals and applies more broadly

• The False Claims Act allows the government to take action against false or fraudulent claims submitted for federal payment.

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 healthcare providers like physicians, hospitals, and nursing homes that bill Medicare or Medicaid. It also extends to organizations that offer related services, such as labs and imaging centers.

At its core, the law protects patients from unnecessary care driven by financial relationships. It helps reduce the risk of fraud, overbilling, and services that patients don’t actually need by limiting when and how referrals can happen.

Stark Law: Designated health Services Explained

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 in Healthcare

Legal entities record and publish Stark Law violations 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. 

How Stark Law Examples Clear Up Confusion

Since its introduction in 1989, the Stark Law has gone through multiple changes, making it harder to pin down where the boundaries are. That’s why real-world examples matter. They help break down what the law actually looks like in practice, especially with referrals, exceptions, and financial relationships.

Looking at Stark Law examples where physicians or institutions faced consequences can bring the law into focus. Each situation sheds light on how the rules apply – and how providers can stay on the right path.

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. 

This article was originally published in February of 2023 and was recently updated to reflect current industry trends.