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Physician Self-Referral Law

OIG reviews the Physician Self-Referral Law.

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Hello, my name is James Cannatti. I am an attorney with the Office of Inspector General. I'm going to introduce you to the Physician Self-Referral Law, also called the "Stark" law, which is administered by the Centers for Medicare and Medicaid Services and enforced, in part, by the OIG.

So let's start by exploring why you might care about the Stark law. Well, violations of the law lead to significant penalties.

An entity that submits a claim to Medicare in violation of the Stark law owes back the entire amount of the claim, even if the patient got the services and the services were medically necessary. Parties that knowingly submit or cause these claims to be filed are also subject to False Claims Act liability, civil monetary penalties, and program exclusion.

For example, a physician paid the Government $203,000 to settle allegations that he violated the Stark law for routinely referring Medicare beneficiaries to an oxygen supply company he owned.

To help make sure that your organization doesn't end up like that physician, I'm going to provide you with some background about the Stark law. Keep in mind that the Stark law is just like any other law in that the details are extremely important.

I would encourage you to review the statute and the related regulations or to contact your health care legal counsel if you have questions following this overview. Let's get started. What's the purpose of the Stark law? The Stark law is intended to prohibit improper referral relationships that can harm the Federal health care programs and program beneficiaries.

Improper referral relationships can lead to overutilization, increased costs, and corruption of the medical decision making process.

The Stark law accomplishes this purpose by prohibiting a physician from referring Medicare patients to certain entities with which the physician - or their immediate family member - has a prohibited financial relationship. The law also prohibits those entities from submitting a claim.

Now that you know about the purpose of the law, how do you figure out if you've violated it? Fortunately, you can perform a fairly good Stark law analysis by asking yourself three basic questions:

Question Number 1: Is there a referral from a physician for a designated health service? Generally speaking, a referral is a request by a physician for an item or service payable by Medicare or Medicaid. There are a number of designated health services, including hospital services and clinical laboratory services. You can find a list of all of the designated health services in the Stark law regulations. So, if you don't have a referral from a physician for a designated health service, then you don't have a Stark law problem. But if you do have each of those elements, then you need to go to question number two.

Which is: Does the physician (or their immediate family member) have a financial relationship with the entity providing the designated health service? Financial relationships include ownership/investment interests, as well as compensation arrangements. If you don't have these types of financial relationships, then the Stark law is not implicated. If you do have a financial relationship, like a medical directorship or a lease with a hospital, then you need to ask yourself the third and final question.

Which is: Does the financial relationship fit into a Stark law exception?

You must fit squarely into one of many Stark law exceptions when the law is implicated. There are exceptions for employment arrangements, space and equipment leases, personal services arrangements, and many others. There are specific requirements for each exception, so you may wish to consult with your health care legal counsel about whether your arrangements meet all the requirements of an exception.

If you've reached question number 3 and your financial relationship meets an exception, Congratulations! You're not violating the Stark law. If you've reached this question and your answer is "no," then you've got yourself a Stark law problem.

We don't want anyone to have Stark law problems, so be sure to consider how the law might apply to your financial relationships. If you think you have a Stark law problem, consult with your health care legal counsel to determine how to proceed. You may need to unwind the relationship to avoid a continuing violation of the law. In addition, you may want to consider contacting CMS to resolve past violations of the law. CMS has a Stark Law-specific Self Disclosure Protocol that may be available for disclosing and resolving a violation.

Thank you for your interest in learning about the Stark law. Again, I would encourage you to review the statute and related regulations or consult with your health care legal counsel for more information.