A medical practice requires cooperation between medical professionals to properly function. This cooperation is not limited to just physicians within the same facility, but also extends to referrals to other practices and providers. However, some have raised concerns about referrals being made for the wrong reasons and this has led to the introduction of legislation and legal consequences.

The Physician Self-Referral Law, also known as the Stark Law (named after US Congressman Pete Stark) was introduced to protect patients from unnecessary bills and procedures in the late 1980s. The law bans physicians from referring patients to “Designated Health Services” that are payable by Medicare or Medicaid, with which the physician or immediate family member has a financial relationship.

To continue providing value-based care in the current age, it is important for providers to understand this law and all the changes that have been made to it since it was first introduced.

Timeline of Changes Made to the Stark Law

Enacted in 1989, the Stark Law is a strict liability statute meaning there is no requirement for proof of specific intent to violate the law. It was initially only applicable to physician referrals for clinical laboratory services.

In 1993-94 Congress expanded the law to include additional Designated Health Services (DHS) and made certain parts of the law applicable to Medicaid programs.

The law was then further expanded in 1997, with Congress adding a provision that permits the Secretary to issue written advisory opinions concerning whether or not a referral to DHS is prohibited under section 1877 of the Act.

The powers of the Secretary were further expanded in 2003, with Congress authorizing them to allow for exceptions in situations where the physician receives necessary non-monetary compensation that is used solely to receive and transmit electronic prescription information. A temporary moratorium was also placed on referrals to certain specialty hospitals where the physician had an ownership or investment stake.

On September 23, 2010, the Medicare self-referral disclosure protocol (SRDP) was published. This established a process enabling providers of services and suppliers to disclose actual or potential violations of the self-referral rule.

CMS announced further changes to the regulations of the law in order to modernize it which went into effect in January 2021. These changes allow for greater flexibility and protection for arrangements that benefit and do not abuse the relationship between physicians and facilities. The flexibility allows practices to avoid situations where medical care might be compromised due to fear of potential violations. This addition to the law also includes guidance on determining whether payments are fair market value.

Consequences of Violations

Violations of the Stark Law, when identified, can have many potential consequences. Denial of billing for the practice or facility, payment refunds, and denials of payment are all possible. Fines up to $15,000 for each questionable service, exclusion from state and government healthcare programs, and penalties of up to $100,000 for attempting to circumvent the regulations of the Stark Law are also possible.