The Physician Self Referral Law (Stark Law): Learn Now

The article discusses the Physician Self-Referral Law [42 U.S.C. § 1395nn] (Stark law) and the possibility of changing parts of the law to make it easier for healthcare providers to self-refer for services payable by Medicare or Medicaid. Also, this blog post article is reviewing Robert King’s article from fiercehealthcare.com titled CMS’ impending overhaul of the Stark law can only go so far, experts say. Physicians are not allowed to self-refer patients for additional services. Although, there are some exceptions, where the entity receiving the referral would benefit the original referring physician. Or family member financially from the referral. You may view Mr. King’s article by accessing the link below.


What is The Physician Self Referring Law (Stark law)

Before we jump into the article, we need to discuss what the Stark law is and why the Centers for Medicare and Medicaid Services (CMS) find it important. This time, The official Office of Inspector General website of Health and Human Services states that the Stark law is one of the 5 most important Federal fraud and abuse laws. The 5 most important according to the Office of Inspector General are the

  • False Claims Act
  • Anti-Kickback Statute
  • The Exclusion Authorities
  • The Civil Monetary Penalties Law
  • The Physician Self Referral Law

The Stark Law’s official name is the Physician Self-Referral Law [42 U.S.C. § 1395nn]. The Office of Inspector General website states the law “prohibits physicians from referring patients to receive ‘designated health services payable by Medicare or Medicaid from entities with which the physician or an immediate family member has a financial relationship unless an exception applies.” It goes on to state, “financial relationships include both ownership/investment interests and compensation arrangements.

Office of Inspector General

The Office of Inspector General website gives an example, “if you invest in an imaging center, the Stark law requires the resulting financial relationship to fit within an exception. Or you may not refer patients to the facility and the entity may not bill for the referred imaging services.”

The way I interpret this is if you are a physician and need to refer a patient for another service. You may not refer it to a service with which you have a financial interest. If a physician needs to refer someone for an MRI, the physician may not refer them to a facility that does MRI’s that the physician or a family member has a financial interest in.

The OIG describes some “designated health services as being:

  • Clinical laboratory services
  • Physical therapy, occupational therapy, and outpatient speech-language pathology services
  • Radiology and certain other imaging services
  • Radiation therapy services and supplies
  • DME and supplies
  • Parenteral and enteral nutrients, equipment, and supplies
  • Prosthetics, orthotics, and prosthetic devices and supplies
  • Home health services
  • Outpatient prescription drugs; and
  • Inpatient and outpatient hospital services
physician self referral law
physician self referral law

Penalties for Violating the Physician Self Referral Law

The penalties for violating the Physician Self-Referral Law (Stark law) are up to $15,000 per service submitting claims in violation of the law. In addition, penalties of up to $100,000 for “circumvention schemes” between physicians or entities entering into arrangements can be levied. Last, physicians and entities may be excluded from participating in the Medicare and Medicaid programs. The Stark law is a strict liability statute. A strict liability statute does not require a specific intent to violate the law. Meaning violating the law unintentionally or without knowledge does not excuse the violating party from liability.  

Robert King’s Article on FierceHealthcare 

Now that we know what the Physician Self-Referral Law or Stark law is. Let’s look closer at Robert King’s article on fiercehealthcare.com. King writes the healthcare industry has been pressing the Trump administration to overhaul the Stark law.

Why Change The Physician Self Referral Law

King writes “[healthcare] industry wants CMS to adopt new regulations on Stark because the law has had a chilling effect on participation in value-based payment agreements.” King’s article does not mention what “value-based payment agreements are. The Centers for Medicare and Medicaid Services website provides a definition and why the Centers for Medicare and Medicaid Services (CMS) says they are important:  

Value-based programs reward health care providers with incentive payments for the quality of care they give to people with Medicare. These programs are part of our larger quality strategy to reform how health care is delivered and paid for. Value-based programs also support our three-part aim:

  • Better care for individuals
  • Better health for populations
  • Lower cost

Our value-based programs are important because they’re helping us move toward paying providers. It is based on the quality, rather than the quantity of care they give patients. The information is provided by the Centers for Medicare and Medicaid Services.

Physician Self-Referral

Allowing a physician to self-refer to an organization that they have a financial interest in can obviously lead to fraud, waste, and abuse of Medicare. For example, if a physician has a financial interest in a company that provides MRI’s the physician might be more inclined to refer a patient for an MRI that may not be medically necessary. On the other hand, the same physician might be able to provide faster service to their patients by being able to self-refer them to an entity they have more control over.

To keep with the example of the physician with a financial interest in an MRI scanning company, being able to self-refer to their company may allow their patients to get services faster and provide a higher quality of healthcare. How many times have we heard stories from our friends and families of having to wait long periods of time for referrals to specialists for specific procedures?  

Attorney’s Opinions

physician self referral law
physician self referral law

King quotes in his article Andrew Wachler, an attorney and partner with the law firm Wachler & Associates “It thwarts the creativity necessary and risk to implement some of these value-based systems and quality incentives that are going to be integral into what we expect to see in the future.” King writes, “the most likely change that CMS can make to Stark is via exceptions.”

Robert King goes on to quote Charles Oppenheim a partner at the law firm Hooper, Lundy & Bookman and the author of the American Health Law Association’s Stark guide, “if they think it is appropriate and they can craft an exception that people think is useful and workable that has broad application but also protects against abuse then they could do that.”  

King next states, “but industry stakeholders hoping for a broad exception could be disappointed..” and quotes Oppenheim as saying “people are always going to be looking for the broadest possible exception to use, CMS is always going to be nervous and put in safeguards.”

Likelihood of Stark Law Changing 

King reports Stark reform does not have much momentum with Congres. King states, “Lawmakers in prior congressional sessions have introduced bills to adopt reforms. But in the latest Congress, most attention has been on drug prices and surprise billing.” Lee Little a partner with the law firm Hamil Little is quoted by King as saying, “I would anticipate the law would remain complex and I would anticipate it will continue to be daunting, but hopefully, the changes that will be made will be clear and uniform so that they can open up the opportunity for individual physician groups to participate in value-based care as meaningfully as hospitals and health systems.”

Conclusion — Learn Now The Physician Self Referral Law: Stark Law

Almost every aspect of Medicare is confusing and the Physicians Self-Referral Law (Stark Law) is no exception. The need for oversight with physicians self-referring is certainly evident. The reason the law is in effect is to protect against fraud, waste, and abuse of Medicare. We often hear of stories of physicians ordering unnecessary tests to pad the coffers of their business. The Stark law is one way of protecting against such abuses. However, the law can also unnecessarily restrict good physicians from referring to their own entities to provide fast quality healthcare to their Medicare patients. In addition, the law can hinder physicians from referring to value-based programs that provide incentive payments to health care providers to deliver quality care to those with Medicare.  

More Research

About The Author — Christopher Duncan

I’m Chris Duncan, owner of Trusted Benefits Direct. As your Medicare advisor, I want you to know that my business offers superior solutions for everyone. I do not work for insurance companies, which allows me to serve you at a high level without any hidden agendas or conflicts of interest. All resources are provided at no cost. Because people must find peace of mind when looking ahead years down the line.

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