Avoiding Self-Referral: Understanding the Stark Laws

By Wool, Hayden S.; Barrett, Dennis | Medical Economics, April 10, 2015 | Go to article overview

Avoiding Self-Referral: Understanding the Stark Laws


Wool, Hayden S., Barrett, Dennis, Medical Economics


Physicians today must understand a myriad of laws and regulations that govern not only how they practice medicine, but also how they bill and refer their patients for services both within and outside their own practice.

Among the most significant, and often difficult to understand of these laws is the physician self-referral law, more commonly known as the "Stark Law,"named for Its champion and co-sponsor, U.S. Representative Fortney H. "Pete" Stark of California.

The Ethics in Patient Referrals Act of 1989, the original name for the Stark Law, was initially designed to limit/prevent physicians from referring patients for clinical laboratory services under the Medicare Program to entities in which the physician or a relative had a financial interest.

The rationale for the law was a concern that physicians were more likely to order tests if they had a financial stake in the provision of such services.

The law and its corresponding regulations have expanded significantly in the past quarter century thanks to passage of an amendment to the law in 1993 and the promulgation of a substantial number of regulations in three phases (commonly referred to as Stark I, Stark II and Stark III) between 1992 and 2007.

The commentaries explaining the three phases of regulations issued by the Center for Medicare & Medicaid Services (CMS) between 2001 and 2007 and the 2015 Physician Fee Schedule are thousands of pages long.

This regulatory maze has made complying with the law very difficult for even the most well-intentioned of physicians. Among other things, the expansion increased the list of services that fall under the law's purview (known as designated health services or"DHS") to include:

* clinical laboratory services;

*I physical therapy services;

* occupational therapy services;

* radiology services;

* radiation therapy services and supplies;

* durable medical equipment and supplies;

* parental and enteral nutrients;

* equipment and supplies;

* prosthetics, orthotics and prosthetic devices and supplies;

* home health services;

* outpatient prescription drugs;

* inpatient hospital services; and

* outpatient hospital services.

Elements of the Stark prohibition

The basic elements of the Stark self-referral prohibition are as follows: A physician may not make a referral to an entity for the provision of DHS for which Medicare payment may be made (and the entity may not present a claim for services provided as a result of such referral) if the physician oran immediate family member has a financial relationship with the entity unless either the referral or the financial relationship is "excepted" from the Law's coverage.

The scope of the law is broad enough to include, without limitation, referrals by a physician to a hospital with which the physician has a financial relationship as well as a referral by a physician to the physician's own practice. Each of the key terms have specific meanings within the prohibition.

For example, a financial relationship is defined broadly to include both a direct or indirect ownership or compensation arrangement. An immediate family member is defined as a spouse or a child, sibling, parent, grandparent, stepchild, step-parent, stepWhat sibling, and the spouse of any of the aforementioned individuals. …

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