Stark Law: Physician Self-Referral and Strict Liability
The Stark Law, 42 U.S.C. 1395nn, prohibits a physician from referring Medicare patients for designated health services to an entity with which the physician or an immediate family member has a financial relationship, unless a specific exception is satisfied. It is a strict liability statute requiring no proof of intent.
Strict liability is what makes it dangerous
The Anti-Kickback Statute requires intent. The Stark Law does not. If a financial relationship exists and no exception is fully satisfied, the referral is prohibited and the claims that follow are not payable, regardless of what anyone intended.
That distinction matters enormously in practice. A well-intentioned arrangement that misses one element of an exception, for example a lease that was never put in writing or compensation that drifted above fair market value, creates liability with no defense based on good faith.
Designated health services
The prohibition applies to a defined list of services.
- Clinical laboratory services
- Physical therapy, occupational therapy, and outpatient speech-language pathology
- Radiology and certain other imaging services
- Radiation therapy services and supplies
- Durable medical equipment and supplies
- Parenteral and enteral nutrients, equipment, and supplies
- Prosthetics, orthotics, and prosthetic devices
- Home health services
- Outpatient prescription drugs
- Inpatient and outpatient hospital services
Where exceptions fail
Exceptions exist for bona fide employment, personal service arrangements, space and equipment rental, and others. Each has multiple elements and all must be met.
The recurring failures are the same ones that appear in kickback cases. Compensation above fair market value. Terms that vary with the volume or value of referrals. Agreements not reduced to writing or not signed. Arrangements that continued after the written term expired. Space or equipment leases where the rate does not reflect market.
The connection to the False Claims Act
A claim submitted for a service furnished pursuant to a prohibited referral is not payable. Submitting it anyway, and certifying compliance with the conditions of payment, is what converts a Stark problem into a False Claims Act case with treble damages.
That is why Stark theories appear so often in qui tam complaints against hospitals and health systems. The underlying arrangement may be a technical failure, but the claims that flowed from it are the damages.
Frequently asked questions
What is the difference between the Stark Law and the Anti-Kickback Statute?
Stark is civil, applies strict liability, and covers physician referrals for designated health services under Medicare. The Anti-Kickback Statute is criminal, requires intent, and covers remuneration for referrals across all federal healthcare programs. Conduct often violates both.
Does Stark apply to Medicaid?
The federal statute applies to Medicare. Some states have adopted analogous provisions covering Medicaid, and a Stark violation can still support a False Claims Act theory where Medicaid claims were affected.
Can a technical violation really create liability?
Yes, and this is the point most often misunderstood. Because there is no intent element, a missing signature or an expired written agreement can put an otherwise legitimate arrangement outside its exception.
Who usually reports Stark violations?
Physicians who declined an arrangement, practice administrators, compliance officers, and finance staff who priced or approved the compensation.
The attorneys who handle these cases
Related reading
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