Stark Law Defense

Stark Law contains a set of U.S. federal laws, with a focus on healthcare abuse and fraud. The law prohibits doctors from referring patients to a specific health care provider that is paid for by Medicare if they have a financial arrangement or will otherwise benefit financially. Given the potential broad interpretation of a financial arrangement, the government has actually defined it as the referring physician having either a direct or indirect investment interest or ownership. This interpretation includes any of the physician’s family members.

Since Stark Law isn’t a criminal statute, there are several agencies that can pursue civil action if it’s violated. This is something that is generally pursued by Health and Human Services through the Inspector General and can result in thousands of dollars in monetary penalties for each one of the services billed to Medicare. There are other penalties associated with this violation that could potentially triple the penalty.

What is Stark Law?

Stark Law contains a set of U.S. federal laws, with a focus on healthcare abuse and fraud. The law prohibits doctors from referring patients to a specific health care provider that is paid for by Medicare if they have a financial arrangement or will otherwise benefit financially. Given the potential broad interpretation of a financial arrangement, the government has actually defined it as the referring physician having either a direct or indirect investment interest or ownership. This interpretation includes any of the physician’s family members.

What Constitutes a “Financial Arrangement”?

Who Enforces Stark Law?

When a claim is brought against a physician for violating Stark Law, the practitioner’s attorney will generally have to defend them against Medicare, Medicaid, the Inspector General, and the Department of Justice. The charge is that the physician violated Stark Law, when intentional or unintentional.

Since Stark Law isn’t a criminal statute, there are several agencies that can pursue civil action if it’s violated. This is something that is generally pursued by Health and Human Services through the Inspector General and can result in thousands of dollars in monetary penalties for each one of the services billed to Medicare. There are other penalties associated with this violation that could potentially triple the penalty.

Agencies That Enforce Stark Law

Strict Liability: Intent Doesn’t Matter

What’s tricky about Stark Law is that there is no requirement to prove that the physician intended to violate the law. This is because it’s a strict liability statute. In other words, a physician that made prohibited referrals and did so accidentally, can be found responsible for breaking the law. This means a physician can unknowingly break Stark Law and be subject to steep penalties. It’s worth noting that practitioners who violate the law with intent are subject to greater penalties.

DEFENSE TEAM SPOTLIGHT

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Legal Scenario: What Would You Do?

Scenario

You are a cardiologist who owns a partial interest in a diagnostic imaging center, and you regularly refer your Medicare patients there for stress tests and echocardiograms. A former employee has reported your referral pattern to the Office of Inspector General, and you've just received a Civil Investigative Demand requesting all financial records related to the imaging center.

Could my ownership stake in the imaging center and my Medicare referrals there expose me to Stark Law violations, and what penalties am I facing?

Attorney's Answer

Your situation raises serious concerns under 42 U.S.C. § 1395nn, the Stark Law, which strictly prohibits physician self-referrals for designated health services payable by Medicare when a financial relationship exists — and your ownership interest clearly qualifies. Unlike the Anti-Kickback Statute, the Stark Law is a strict liability statute, meaning the government does not need to prove you had intent to defraud; the prohibited referral alone is enough to trigger violations. Penalties can include denial of payment, mandatory refund of all amounts collected on referred claims, civil monetary penalties up to $15,000 per service, and potential exclusion from all federal healthcare programs. However, there are several statutory exceptions under the Stark Law — including the in-office ancillary services exception and certain ownership exceptions for rural providers — and an experienced healthcare fraud defense attorney can evaluate whether any of these safe harbors apply to shield your arrangement.

This is general information only. Contact us for advice specific to your situation.

Understanding Strict Liability in Stark Law

CRITICAL: A physician can unknowingly break Stark Law and be subject to steep penalties. This is because it’s a strict liability statute – the government does NOT have to prove intent.

Stark Law Exceptions