Avoiding Stark Law Violations and Penalties

Under Stark law, doctors are prevented from making self-referrals. More precisely, physicians are restricted from referring Medicare and Medicaid patients to a DHS (designated health services) provider if that provider has a financial relationship with the physician. Fines are substantial so it’s wise to make every effort to avoid Stark Law violations and penalties.

Requirements and Exceptions

Under Stark law, a “financial relationship” can be:

  • Ownership: If a physician owns a DHS provider, referring Medicare and Medicaid patients to them is prohibited.
  • Investment interest: Physicians may not refer their Medicare or Medicaid patients to DHS that they have invested in.
  • Compensation arrangements: Physicians can’t refer Medicare or Medicaid patients to any health services provider in return for compensation.

Exemptions to the financial relationship portion of the Stark law include financial relationships that deal with the following:

  • Employment relationships between practitioners and a practice;
  • Rental of equipment or office space;
  • Ownership in public securities; and
  • In-office ancillary services.

While these are exempted, they do need to be structured correctly. Otherwise, they could result in a technical Stark Law violation.

Types of Stark Law Violations

There are two main types of violations of Stark law: substantive and technical. These are explained as follows:

  • Substantive: A substantive violation of Stark law is fairly straightforward. It occurs when physicians refers patients to those with whom they have a definite financial relationship (i.e. compensation agreements and so forth).
  • Technical: Technical violations are trickier in that they focus on the paperwork and structuring of exempted contracts, such as employment relationships or auxiliary in-office services. These may involve paperwork that wasn’t filled out exactly right or a contract that has expired.

Substantive violations can be avoided fairly easily by abiding by law. Steering clear of technical violations can be more challenging, as violations are usually the result of unintentional errors. Unfortunately, both types of Stark Law violations carry the same penalties.

How to Prevent Technical Stark Law Violations and Penalties

The best way to avoid Stark Law violations is to enlist healthcare attorney who can look over agreements and assist in structuring them.

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