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Physician Liability Under Stark Law And Updates From 2017

Wednesday, July 10th, 2019
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The Stark Law refers to a federal law that regulates how doctors can make referrals for certain items or services provided to Medicare and Medicaid patients. The Stark laws were named for Congressman Pete Stark, the original legislator who sponsored the first of the three bills implementing the law. The purpose of Stark Law is to discourage doctors from ordering unnecessary items or services and engaging in self-dealing when dealing with Medicare and Medicaid patients. It is important for physicians to understand the Stark Law and the updates it received in 2017.

Liability for Physicians

The Stark Law forbids doctors from referring Medicare (or Medicaid) patients to medical providers in which the doctor has a financial interest unless an exception to the law is met. The financial interest can be derived directly, like if the doctor or a family member is a partner in a clinical lab company. It can also come indirectly, like if the doctor has ownership in a company which has an equity interest in the provider.

The purpose of the Stark Law is to discourage physicians from engaging in self-dealing and to encourage them to refer patients to facilities that provide the best care for needed items or services. Although not every doctor would put a patient’s health on the line for more money, this law was made to help prevent that scenario.

Punishment for Violations of Stark Law

If a physician violates the Stark Law, he could be subject to penalties for each violation. Specifically, the primary penalty is the denial of payment for services provided. Civil monetary penalties of up to $15,000 per violation may also be assessed. Moreover, the Stark Law applies regardless of intent, so it would not matter if the physician was unaware of the financial relationship.

Under the Affordable Care Act, additional penalties were levied pursuant to the federal False Claims Act. If a physician fails to repay an overpayment to Medicare/Medicaid within 60 days after discovery of the overpayment, the claim becomes a false claim and the physician could be subject to an additional penalty of three times the claim amount plus $11,000 per false claim. These penalties can destroy even large medical practices and health systems.

Regulatory updates made in 2017

In 2017, the Centers for Medicare and Medicaid Services (“CMS”) issued a prohibition on a particular unit-based lease arrangement concerning referring doctors. They also updated the list of services covered by the Stark Law and slightly changed the manner in which advisory opinions on the Stark Law must be requested.

CMS clarified that the Stark Law prohibits unit-based compensation (or “pay-per-click deals”). This refers to rent charges in arrangements to lease office space or equipment based on the number of patient referrals. Essentially, CMS has banned lease arrangements where rent payments are based on the number of times the space or items are used (i.e. “per click”) when the lessor refers patients to the lessee, thereby generating revenue to the lessor because of the increased use of the space or items.

The Stark Law continues to adapt to the realities of providing healthcare. It is possible that this rule could be revised based on objections from the healthcare industry. However, for now, it is part of the Stark Law.

Preventing Stark Law Violations in your Practice

If you are concerned about complying with the updates to the Stark Law, you should speak with an experienced healthcare attorney. The Healthcare Attorneys at Brown & Fortunato, P.C. can answer any of your questions related to Stark Law. Call us at (833) 228-6300 or Contact Us by email for more information about how we can help your practice.