Thursday, May 21, 2015

The High Cost of Stark Law Violations

Physician Self-Referrals or Stark Law Violations

The Stark Law generally prohibits physicians from referring patients for Designated Health Services to facilities in which the physician or an immediate family member has a financial interest.

A “financial interest” is defined broadly to include an ownership interest, investment interest, or compensation arrangement.  It covers both direct relationships and indirect benefits, such as when a hospital provides a physician with below-market rent for office space.

The Designated Health Services (DHS) covered by the Stark statute include: 
  • Clinical laboratory services
  • Physical therapy services
  • Occupational therapy services
  • Outpatient speech-language pathology services
  • Radiology and certain other imaging 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 hospital services

The Stark law also prohibits anyone from billing Medicare or Medicaid for services provided as a result of a self-referral.  Any such claim for reimbursement is considered a “false claim” under the False Claims Act.

Several exceptions to the general rule exist, including physician services, in-office ancillary services, ownership in publicly traded securities and mutual funds, rental of office space and equipment, and bona fide employment relationships.

Examples of Stark Law Violations

Part-Time and Consulting Contracts with Referring Physicians
A jury has found that Tuomey Healthcare System in Sumter, S.C., violated the Stark Law by paying doctors in ways that rewarded them financially for referring patients to the hospital.  The jury found that more than 20,000 Medicare claims were tainted by the illegal compensation arrangements.  

Incentive Payments to Doctors
Freeman Health System agreed to pay $9.3 million to resolve allegations that it knowingly provided incentive pay to physicians who referred patients to the hospital system.  The settlement resolves claims by the U.S. government that such incentive payments violated the False Claims Act and the Stark Law.  


Physician Office Leases
HCA Inc. agreed to pay $16.5 million to settle claims that it violated the False Claims Act and the Stark Statute by entering into favorable leases with physicians who referred patients to the hospital. The whistleblower who brought the case will receive 18.5% of the settlement as a reward, or more than $3 million.