The Stark Law

Abstract

The Stark Law broadly prohibits a physician from referring certain designated health services (“DHS”) to any entity with which the physician has a financial relationship. The Stark Law is meant to remove the financial incentives that can influence medical decision-making in ways that are not in the patient’s best interest and which lead to overutilization of federal healthcare services. The law prohibits an entity from submitting claims to Medicare or Medicaid for services that were referred to the entity by a physician, if that physician or a family member has a financial relationship with the entity. Because the Stark Law broadly defines financial relationship to include many very common business arrangements, the Law and its accompanying regulations include multiple safe harbors that allow entities to enter into legal financial relationships. Strict adherence to all of the requirements of a relevant safe harbor, however, is essential to compliance. Violations of the Stark Law can result in civil penalties of up to $15,000 per claim. The Stark Law often serves as the basis for FCA suits when the government can establish that the entity submitted prohibited claims to Medicare or Medicaid with the requisite scienter to violate the FCA. The government has established a self-disclosure program that allows entities to disclose actual or potential Stark Law violations and seek early settlement with the government for reduced damages and penalties.