STARK Regulatory Compliance

Fuerst Ittleman David & Joseph’s health care practice group combines experienced lawyers and consultants from several practice areas to provide comprehensive representation in all aspects of STARK Law compliance.

Generally speaking, the STARK Law, found at 42 U.S.C. § 1395nn, prohibits physicians from referring Medicare beneficiaries to an entity in which they, or an immediate family member, have a financial relationship for designated health services, unless an exception applies.

1. STARK Basics

The STARK Law, which was passed in two parts, “STARK I” and “STARK II,” prohibits physicians from referring their Medicare and Medicaid patients to business entities in which the physicians or their immediate family members have a financial interest. More specifically, STARK prohibits physicians from making referrals to an entity for clinical lab services if the physician had a prohibited financial relationship with the entity. In addition, STARK prohibits physicians from referring Medicare patients for designated health services to an entity with which the physician (or immediate family member) has a financial relationship, unless an exception applies.

“Designated health services,” according to 42 U.S.C. § 1395nn(h)(6), include:

(A)     Clinical laboratory services;
(B)     Physical therapy service;
(C)     Occupational therapy services;
(D)     Radiology services;
(E)      Radiation therapy services and supplies;
(F)      Durable medical equipment and supplies;
(G)     Parental and enteral nutrients, equipment, and supplies;
(H)     Prosthetics, orthotics, and prosthetic devices and supplies;
(I)      Home health services;
(J)      Outpatient prescription drugs;
(K)     Inpatient and outpatient hospital services;
(L)      Outpatient speech-language pathology services.

2. Financial Relationships and Prohibited Referrals

In order to understand STARK’s reach, it is important to understand how STARK defines a financial relationship and a referral.

The STARK Law broadly defines “financial relationships to include an ownership or investment interest in an entity or a compensation arrangement, states 42 U.S.C. § 1395nn(a). Compensation arrangement, in turn, is defined as “any arrangement involving any remuneration between a physician (or an immediate family member of such physician) and an entity” (42 U.S.C.§ 1395nn(h)(1)(A)). Remuneration, with certain exceptions not applicable to the instant case, includes, “any remuneration, directly or indirectly, overly or covertly, in cash or in kind” (42 U.S.C. § 1395nn(h)(1)(B)).

Referral, for purposes of the STARK Law, is defined as “the request or establishment of a plan of care by a physician, which includes the provision of designated health services,” states 42 U.S.C. § 1395nn(h)(5)(A). The regulations interpreting the statute also broadly define referral as, among other things, “a request by a physician that includes the provision of any designated health service for which payment may be made under Medicare, the establishment of a plan of care by a physician that includes the provision of such a designated health service, or the certifying or re-certifying of the need for such a designated health service” (42 C.F.R. § 411.351). A referring physician is defined in the same regulation as “a physician who makes a referral as defined in this section or who directs another person or entity to make a referral or who controls referrals made to another person or entity.”

3. Potential Penalties

The STARK Law further provides that should any amounts be billed in violation of the act, the biller shall be liable for the overpayment and must refund that amount to the government, states 42 U.S.C. § 1395nn(g)(2). Violators of the STARK Law are subject to potential civil monetary penalties of up to $15,000 for each service billed.

In addition, violators also face potential False Claims Act (FCA), 31 U.S.C. § 3729 et seq., liability for knowingly submitting prohibited claims. Generally speaking, the FCA empowers private persons, known as relators, to file civil actions known as qui tam lawsuits and recover damages on behalf of the United States from any person who: 1) knowingly presents, or causes to be presented, a false or fraudulent claim for payment; or 2) knowingly makes uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the government. As it relates to this case, “[f]alsely certifying compliance with the STARK Law in connection with a claim submitted to a federally funded insurance program is actionable under [the FCA].”

4. STARK’s Exceptions for Certain Compensation Arrangements

The STARK Law also provides for several exceptions to the broad general prohibition on compensation arrangements between health care entities and referring physicians. If a hospital’s financial relationship with a physician comes under one of the exceptions, then it is not prohibited under STARK. The complete list of compensation arrangements exceptions are found at 42 U.S.C. § 13955nn(e).

5. Relationships impacted by the STARK Law

Due to STARK’s breadth, numerous health care business relationships can trigger the need for a STARK analysis. Depending on the nature and structure of the transaction, such health care relationships may include:

(1) physician employment and independent contractor agreements
(2) medical director agreements
(3) hospital/physician recruitment arrangements
(4) arrangements and agreements between physicians and other designated health service providers
(5) medical equipment and office space leasing agreements

In addition, STARK’s prohibitions also apply within a physician practice group setting. Thus, if a physician practice group provides multiple designated health services within its practice, STARK may be implicated and the relationship between the practice group and the individual physicians must comply with a STARK exception.

The health law attorneys of Fuerst Ittleman David & Joseph have extensive experience handling the various regulatory and compliance issues surrounding the provision of Medicare and Medicaid services, including False Claims Act (qui tam cases) as well as violations of the Anti-Kickback and STARK self-referral laws, among others. Our health care regulatory compliance and corporate law attorneys have experience in structuring arrangements and transactions to comply with the STARK Law. In addition, Fuerst Ittleman David & Joseph’s health care regulatory compliance attorneys have experience in reviewing and analyzing proposed transactions and arrangements to identify potential STARK Law pitfalls. We can can also provide assistance with investigating possible violations of the STARK Law which exist in your organization and in advising clients on corrective and remedial actions. When necessary, we can provide aggressive, experienced litigation services in civil and criminal actions related to these areas. FIDJ also handles provider acquisitions and provides strategic tax planning advice to health care providers and suppliers.

Fuerst Ittleman David & Joseph’s health care practice group combines experienced lawyers and consultants from several practice areas to provide comprehensive representation in all aspects of health care law.  Let us show you how we can help today.

For more information, please contact us at contact@fuerstlaw.com or call us directly at 305-350-5690.