Stark Law
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Fundamental Concepts of Stark Law and Anti-Kickback Statute

In most businesses, it’s normal to refer clients, but in healthcare, referring patients is closely watched, especially if the person referring gets paid or gets something in return. The federal Stark Law and Anti-Kickback Statute mostly apply to Medicare, Medicaid, and other federal healthcare programs. These laws are there to stop and punish situations where money schemes might be seen as cheating the Medicaid and Medicare systems. The main goal of these laws is to protect people who use federal healthcare programs by preventing and punishing things like using medical services too much, raising costs, giving low-quality care, and unfair competition.

Stark Law:
The Stark Law, passed by Congress in 1989, stops doctors from sending Medicare patients to labs they have a financial interest in, whether it’s direct or indirect. The Stark Law is strict, meaning even if a doctor or business didn’t mean to break it, they can still be held responsible. Penalties for breaking the Stark Law include payment denial, paying back three times the wrong amount, a fine of $15,000 per service, and a $100,000 fine for arrangements that try to get around the law.

The Stark Law does three main things:

  1. It says doctors can’t send Medicare patients to places that provide certain health services if the doctor or their family has a money connection with that place unless there’s a special rule that allows it.
  2. It stops the place from billing Medicare or making Medicare pay for the services (even if they use a third party).
  3. It makes specific exceptions that let doctors make certain deals and lets the Secretary decide if a money connection is a risk for Medicare or patients.

The Stark Law can be confusing because its definitions are very wide. Family members include spouses, parents, kids, siblings, and more. The definition of a money connection covers different types of money deals and many kinds of pay arrangements. Also, the definition of referral doesn’t just mean sending patients – it also includes ordering certain health services that can be paid for. If a doctor makes a referral that breaks the Stark Law, the place can’t ask for money from Medicare or other federal healthcare programs for those services. Doctors who do these services themselves can make referral deals without worrying too much about the Stark Law, but they still have to follow both the Stark Law and Anti-Kickback Statute.

Health services or items, defined as Designated Health Services (DHS), that are under the Stark Law include:
Clinical laboratory services: Tests and checks done in a lab to help diagnose illnesses.
Physical therapy services: Exercises and treatments to help people recover from injuries or improve their physical abilities.
Occupational therapy services: Help people to do daily activities like getting dressed or cooking if they have difficulties.
Outpatient speech-language pathology services: Help for people with speech and language problems.
Radiology and certain other imaging services: Procedures like X-rays and scans to see inside the body.
Radiation therapy services and supplies: Treatments using special rays to fight diseases like cancer.
Durable medical equipment and supplies: Tools like wheelchairs, crutches, or oxygen machines that people need for their health.
Parenteral and enteral nutrients, equipment, and supplies: Special food and equipment used when people can’t eat normally.
Prosthetics, orthotics, and prosthetic devices and supplies: Artificial body parts like limbs and devices to help with body support.
Home health services: Medical care given at home by nurses or therapists.
Outpatient prescription drugs: Medicines prescribed by a doctor that you can get at a pharmacy.
Inpatient and outpatient hospital services: Care provided in a hospital, either staying overnight (inpatient) or just visiting for treatment (outpatient).

Stark Exceptions:
Exceptions to the Stark Law must follow the rules of the Centers for Medicare & Medicaid Services (CMS) and follow the Anti-Kickback statute. The number and number of referrals can’t be too high. Doctors and healthcare businesses need to be careful about deals where money depends on how many patients are referred – these often get checked for Stark Law problems. Any deals that fit an exception to the Stark Law have to follow all the rules for that exception, which can be harder than it seems. Usually, deals between doctors and places should be written down and signed, for a year at least. The exceptions to the Stark Law usually fall into three groups, based on how the doctor is connected to the place. But sometimes, a deal might fit more than one exception.

  1. Exceptions to both compensation and ownership or investment arrangements
    • Physician Services
    • In-Office Ancillary Services
    • Services Furnished by an Organization to Enrollees
    • Academic Medical Centers
    • Implants Furnished by an Ambulatory Surgical Center (ASC)
    • Eyeglasses and Contact Lenses After a Patient has Cataract Surgery
    • EPO (Erythropoietin) and Other Prescription Drugs for Dialysis Patients who need Outpatient Treatment
    • Preventative Services (Vaccines, Immunizations, etc.)
    • Intra-Family Rural Referrals
  2. Exception to only ownership or investment arrangements
    • Interest in Publicly Traded Securities (such as at the New York Stock Exchange)
    • Interest in Mutual Funds covered by the IRS
    • Interest in Certain Providers (such as rural providers)
  3. Exceptions to only compensation arrangements
    • Rental of Office Space
    • Equipment Rental
    • Bona Fide Employee Relationship
    • Personal Service Arrangement (i.e. Independent Contractors)
    • Doctor Incentive Plan
    • Physician Recruitment
    • Charitable Contributions
    • Nonmonetary Compensation
    • Fair Market Value Compensation
    • Medical Staff Incidental Benefits
    • Risk-sharing Arrangements
    • Compliance Training
    • Indirect Compensation Arrangements
    • Obstetrical Malpractice Insurance Subsidies
    • Professional Courtesy
    • Retention Payments in Underserved Areas
    • Community-wide Health Information Systems
    • Electronic Prescribing Items and Services
    • Electronic Health Records Items and Services
    • Assistance to Compensate a Non-Physician Practitioner
    • Timeshare Arrangements

Anti-Kickback Statute:
The Anti-Kickback Statute, made in 1972, says no one can offer, ask for, or accept gifts or money in return for sending business that federal healthcare programs pay for. Unlike the Stark Law, the Anti-Kickback Statute covers all kinds of things, not just health services. It can affect doctors, healthcare groups, and others, even if they’re not healthcare groups. Money includes discounts, gifts, and even free stuff.

The Anti-Kickback Statute is a criminal law, so it needs proof that someone wanted to get referrals to be guilty. Breaking the Anti-Kickback Statute can lead to criminal fines, prison time, being kicked out of Medicare, Medicaid, and other federal programs, and civil fines.

Anti-Kickback Exceptions:
Safe Harbor rules let some payments and business practices continue even if they seem to break the Anti-Kickback Statute. Parties must follow Safe Harbor rules to avoid getting in trouble. If a business deal doesn’t fit in a Safe Harbor, it might still be okay if the Office of the Inspector General (OIG) or the U.S. Department of Health and Human Services says it’s okay. Just like the Stark Law, if doctors, healthcare groups, or others want to make a deal, they have to make sure they follow all the rules for the Safe Harbor they use. Safe Harbors can be hard to understand and have strict requirements.

Safe Harbors include things like investments, renting space or equipment, personal services deals, selling a practice, and more.

The Stark Law and Anti-Kickback Statute are meant to stop people from getting money for making referrals. Congress wanted to keep Medicare and Medicaid honest, prevent unnecessary treatments, and protect people who rely on these programs. Different government agencies, like the Department of Justice and the Centers for Medicare and Medicaid, make sure these laws are followed. The False Claims Act can also be used to fight healthcare fraud under these laws. It makes sure federal healthcare programs don’t pay for false or dishonest claims. Claims that come from kickbacks or break the Stark Law might be considered false, and people might have to pay fines under the False Claims Act, Anti-Kickback Statute, or Stark Law.

Contact one of our attorneys at Dike Law Group and schedule a meeting so we can discuss at

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