Stark Law Violations Attorney

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The Stark Law is a type of Anti-Kickback law that inhibits improper patient referrals inside government-funded healthcare programs. Like the Anti-Kickback Statute, the Stark Law enables the government and private citizens to win back any losses resulting from healthcare fraud.

Congress passed the Stark Law, which is known as the Physician Self-Referral Law, in 1989. To start with the law prevented physicians from making Medicare patient referrals to clinical laboratories that either the physician or an immediate family member of the physician had a financial relationship with or interest in. The purpose of the law was to stop physicians and their family members from making money from their own referrals.

Like the Anti-Kickback Statute, the Stark Law is a criminal statute that the federal government can use to prosecute anyone who has violated the law.  The Stark Law might also be enforced through the federal False Claims Act for civil liability. Under the False Claims Act, private individuals can file a Stark Law lawsuit as qui tam relators, or whistleblowers, that help the government to go after violators of the law.

Stark Law lawsuits can help to deter healthcare fraud by encouraging vigilance among healthcare providers and also by clarifying the nuances and complexities of the Stark Law.  The False Claims Act also provides attractive monetary incentives in order to encourage private individuals to expose violations of the Stark Law.   Whistleblowers who bring a Stark Law lawsuit on behalf of the government can receive between fifteen to thirty percent of the money recovered. The Government’s recoveries in Stark Law lawsuits can be rather significant. The penalties for violating the False Claims Act include:

  • Civil penalties of $5,500 to $11,000 for each false claim submitted.
  • Triple damages, or three times the amount of damages that the federal government incurred.
  • Attorneys’ fees.
  • Physicians and providers who violate the Stark Law may be excluded from federal healthcare programs.

Physicians and providers who violate the Stark Law may be excluded from federal healthcare programs.  The Stark Law governs physician self-referral for Medicare and Medicaid patients. The law is named after United States Congressman Pete Stark, who sponsored the initial bill. Specifically, the Stark Statute, 42 U.S.C. § 1395nn, prohibits a physician from referring Medicare patients for specific designated health services or DHS, to entities that they or an immediate family member have a financial relationship with or a profit agreement.

Stark 1, which was enacted in 1989, applies only to physicians referrals for clinical laboratories. In 1993, the Congress extensively revised the Stark Law and expanded the referral and billing prohibitions to cover some additional kinds of designated health services. This legislation is also identified as Stark 2The legal definition of a physician is either a doctor of medicine or osteopathy, a doctor of dental surgery or dental medicine, a doctor of podiatric medicine, a doctor of optometry, or a chiropractor.

Under the Stark Law, if any financial relationship exists between the DHS and the physician then the physician is prohibited from referring patients to the entity for DHS and the entity is also prohibited from making a claim for payment under the Medicare program for any such referred DHS unless the arrangement falls within an exception.

Stark Law penalties may include:

  • A civil monetary payment of $15,000 for each and every service.
  • A $100,000 civil monetary penalty for each arrangement considered being a circumvention scheme.
  • Exclusion from participation in federal health care programs.

In addition to being subject to a civil monetary penalty for violating Stark Laws, a physician or billing entity may be subject to a civil suit under the False Claims Act. The following are considered to be designated health services under the Stark Law:

  • Clinical laboratory services.
  • Physical therapy services.
  • Occupational therapy and speech-language pathology services.
  • Radiology services, including MRI, CAT scans, and ultrasound services.
  • Radiation therapy services and supplies.
  • Durable medical equipment and supplies.
  • Parenteral nutrients, equipment and supplies.
  • Prosthetics, orthotics, and prosthetic devices and supplies.
  • Home health services.
  • Outpatient prescription drugs.
  • Outpatient and inpatient hospitalization services.
  • Nuclear medicine

Other arrangements that may implicate the Stark Law are:

  • All space and equipment leases.
  • Marketing agreements.
  • Below fair market value agreement between providers and suppliers.
  • Hospital, Retirement home and other facilities cost report certifications.
  • Waiver of co-payments and deductibles.
  • A drug companies failure to report the their best price for drugs to federal payors.
  • All Physician employment and independent contractor arrangements.
  • Office sharing agreements and time-sharing arrangements.

What is the Stark ban on physician self-referral?

The Stark 2 ban began effect on January 1, 1995. On January 4, 2001, the Centers for Medicare and Medicaid Services (” CMS”), that oversees enforcement of the Stark ban, issued the first part of the final regulations that implemented the ban. The Phase 1 final regulations took effect on January 4, 2002 and contained many changes to the Stark 2 ban that directly impacted healthcare providers’ common business relationships. Phase 1 of the rule concerned Section 1877 of the Act, paragraphs (a) and (b), regarding the general prohibition and the exceptions related to ownership and investment interests; the statutory exceptions for certain compensation arrangements; and the reporting requirements. Phase 2 created new regulatory exceptions and addressed public comments on Phase 1 of the rule making. Phase 1 and Phase 2 of the final regulations were intended to be integrated and read together. Modifications and revisions to Phase 1 are indicated in Phase 2 and corresponding regulations. The Phase 1 and Phase 2 rules together supersede the final rule of 1995 (60 Fed. Reg. 41914), that had been applicable to clinical laboratory services. On September 5, 2007, CMS issued Phase 3 of the final regulations. Phase 3 responds to comments on Phase 2 and addresses the entire Stark regulatory scheme. Phases 1, 2 and 3 of the rules are intended to read as a unified whole. The CMS says that except as otherwise written, being that the preamble in Phase 3 uses different language to describe a concept that was addressed Phase 1 or Phase 2, the intent of it is to expound on previous discussions and not to change the scope or meaning.

What are the penalties for violating the Stark ban?

Penalties for violating the Stark law can be very severe. They include the denial of payment, the refund of payment, the imposition of a $15,000 per service civil monetary penalty and the imposition of a $100,000 civil monetary penalty for each arrangement that is considered to be a circumvention scheme.

Who qualifies as a ‘physician’ subject to the Stark ban?

The Phase 1 final regulations define ‘physician’ as “a doctor of medicine or osteopathy, a doctor of dental surgery or dental medicine, a doctor of podiatric medicine, a doctor of optometry, or a chiropractor.”

Who qualifies as an ‘immediate family member’ according to the Stark ban?

The term ‘immediate family member’ means “a husband or wife; birth or adoptive parent, child or sibling; step-parent, stepsister, stepchild, or stepbrother; father-in-law, mother-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law; grandparent or grandchild; and spouse of a grandparent or grandchild.”

What are the ‘Designated Health Services’ subject to the Stark ban?

The Designated Health Services (DHS) categories encompassed within Stark include the following:

  • clinical laboratory services
  • physical therapy services
  • occupational therapy and speech-language pathology services
  • radiology services, including nuclear medicine, MRI, CAT scans, and ultrasound services
  • radiation therapy services and supplies
  • durable medical equipment and supplies
  • parenteral and enteral nutrients, equipment and supplies
  • prosthetics, orthotics, and prosthetic devices and supplies
  • home health services; outpatient prescription drugs
  • inpatient and outpatient hospitalization services

Regarding the first five categories of DHS, the Stark regulations identify the specific insurance billing codes in each category, which are considered to constitute DHS. The remaining six categories of DHS are defined in the Stark regulatory text.

What constitutes a referral regarding the Stark ban?

The Stark law defines referral to include a request made by a physician for an item or service that is payable under Medicare or Medicaid. Physicians who perform the DHS that they order personally for their patients can make arrangements without worrying about potential Stark violations.

What a financial relationship means when it comes to the Stark ban?

A ‘financial relationship’ is defined by the Stark law to include either a direct or indirect ownership or investment interest in an entity. Either through equity, debt or other means, or an indirect or direct compensation arrangement with that entity.

What types of statutory exceptions are there if an arrangement falls within the Stark ban?

Exceptions to the Stark ban fall into three categories that are based on the type of financial relationship the physician has with the entity to which they refer patients for DHS:

  • Exceptions that are applicable to compensation and ownership/investment arrangements: Examples include the exception for in-office ancillary services, which is probably the most important exception to the Stark ban and the exception for physician services.
  • Exceptions applicable only to ownership or investment arrangements: Examples include exceptions for publicly traded securities and mutual funds, services furnished by a rural provider, and ownership in a whole hospital.
  • Exceptions that are applicable only to compensation arrangements: Examples include exceptions for bona fide employment relationships, personal services arrangements and rental of office space and equipment.

Is there a process of clarification concerning whether an arrangement falls outside of the Stark ban or is an exception to the ban?

CMS have established an advisory opinion process under which parties to an arrangement may obtain a written determination from CMS regarding whether the arrangement constitutes a ‘financial relationship’ under Stark 2 and whether the arrangement meets an exception.

The Compliance Guidance for Individual and Small Group Physician Practices issued by the Office of Inspector General of the Department of Health and Human Services advises physicians to have all business arrangements that involve referrals reviewed by legal counsel familiar with the anti-kickback and Stark laws. The OIG also issued a supplemental guidance for hospitals, which focuses on physician and hospital relationships under Stark. Business arrangements that should be reviewed for compliance with the Stark law include the following:

  • Physician employment and independent contractor arrangements
  • Organizational and operational structures of all group practices.  Qualifying as a ‘group practice’ under the Stark law can enable physicians to take advantage of certain exceptions, that include the physician services exception and the in-office ancillary services exception
  • Group practices that provide DHS are well advised to review Stark’s group practice requirements to ensure that they qualify under the definition, so they can protect their referrals under the in-office ancillary services exception. Group practice compensation arrangements, including arrangements for the provision of ancillary services and employment and independent contractor arrangements entered into by group practices with physicians. The methods used by group practices for distributing profits from the provision of designated health services and for the paying of productivity bonuses to physicians should be scrutinized very carefully to ensure compliance with the Stark regulations
  • Administrative service contracts entered into by physicians, e.g. medical director agreements
  • Equipment and Space leases
  • Office sharing and time-share arrangements
  • Economic relationships between physicians and the hospitals that they make designated health service referrals, this includes loan agreements, physician recruitment arrangements, independent contractor arrangements, employment agreements and hospital guaranties of physician obligations
  • Practice acquisitions


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