Stark Law

In October of 2019, the Department of Health and Human Services (HHS) announced proposed changes to modernize and clarify the regulations that interpret the Physician Self-Referral Law (known as the “Stark Law”) and the Federal Anti-Kickback Statute.

According to HHS, the proposed rules provide greater certainty for healthcare providers participating in value-based arrangements and providing coordinated care for patients. 

Value-based arrangements aim to provide patients with affordable access to care. Under a value-based arrangement, payment is based not on the amount of treatment provided, but, rather upon specific health outcomes. Providers working in a value-based payment structure therefore have a greater incentive to focus on quality over quantity. 

Coordinated care is the organization of patient care activities between two or more providers in patient care, to ensure appropriate treatment. 

What is the Stark Law?

The Stark Law is a federal statute designed to combat healthcare fraud and abuse. Under the Stark law, physicians may not refer patients for certain treatment covered by Medicare, if the referral is to an entity in which the physician has a financial interest. In other words, a physician may not engage in the practice of “self-referral.”

The term “financial relationship” is broadly defined. A “financial relationship” generally includes any:

  • Direct ownership interest
  • Indirect ownership interest
  • Investment interest

by the referring physician.

The term “financial relationship” also includes financial interests held by immediate family members of the physician. 

The Stark Law is enforced by the HHS’ Office of Inspector General (OIG), which can pursue a civil action against those found to have violated the law. Violators are subject to civil monetary penalties of up to $15,000 for each billed service originating from a prohibited referral, plus three times the amount of the federal government overpayment. 

What is the Federal Anti-Kickback Statute?

The federal Anti-Kickback Statute (sometimes referred to as the “AKS”) prohibits:

  • The exchange (or offer to exchange),
  • Of anything of value,
  • In an effort,
  • To induce (or reward),
  • The referral of business reimbursable by a federal healthcare program (i.e., Medicare).

The types of kickbacks that are prohibited are not limited to “money” kickbacks in the form of dollars. As noted above, a kickback can be anything in value. This includes, for example, low rent for office space or office equipment, vacations, and gifts. Kickbacks may also include refraining from certain activity, such as a doctor’s waiving copayments. “Steering” patients away from valid services is also a prohibited kickback.

The AKS is a criminal law. Potential penalties for violating the AKS include fines of up to $25,000; up to five years in jail; and exclusion from Medicare and Medicaid care program business.

What Else are the Proposed Reforms Designed to Accomplish?

The proposed changes to the Stark Law and Federal Anti-Kickback Statute are also intended to ease the compliance burden for healthcare providers, while maintaining strong safeguards to protect patients and programs from fraud and abuse.

The proposed rules are part of HHS’s Regulatory Sprint to Coordinated Care, which seeks to promote value-based care by examining federal regulations that impede efforts among providers to better coordinate care for patients.

The proposed value-based Stark Law exceptions reward value over volume of provided services. The proposed exceptions also include safeguards that ensure the Stark Law will continue to provide meaningful protection against overutilization of services, while giving providers added flexibility to improve patient quality care. 

The proposed changes to the regulations related to the Federal Anti-Kickback Statute and the Civil Monetary Penalties Law issued by the Office of Inspector General (OIG) are designed to remove burdens that limit coordination of care. The changes are intended to improve coordinated care by offering specific safe harbors for coordinated care arrangements. 

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