The Stark (Law) Reality of Self-Referral in Medicine

As of 1992, the Stark law contains provisions that govern physician self-referral for Medicare and Medicaid patients. The law is named for United States Congressman Pete Stark, who sponsored the initial bill in 1989.

What is Physician Self-Referral?

Physician self-referral is the practice of physicians referring a patient to a medical facility in which they or an immediate family member have a financial interest. It could be ownership, investment, or a structured compensation arrangement. Critics of the practice allege an inherent conflict of interest exists because the physicians can benefit from the referral. They believe that such arrangements may encourage over-utilization of services that drives up health care costs. They also assert that it limits or eliminates competition from other providers. On the other hand, in medically underserved areas, a physician may be providing a service that otherwise is not readily available.

What Constitutes a Referral?

A referral includes a request by a physician for an item or service payable under Medicare or Medicaid (including the request by a physician for consultation with another physician and any test or procedure ordered or performed by such other physician), or a request by a physician for the establishment of a plan of care that includes the provision of Designated Health Services (DHS). The DHS list can be found at the CMS website and is extensive, including ultrasound and other imaging services as well as outpatient pharmacy and physical and occupational therapy.

Are there exceptions?

The law contains numerous exceptions that add to its complexities. For example, the referral-source physicians who are members of a physician group practice can refer a patient for imaging services or other DHS to be provided within the group practice without violating Stark. Qualifying as a “group practice” under Stark enables physicians to take advantage of certain exceptions, including the physician services exception and the in-office ancillary services exception. Group practices that provide DHS should review Stark’s group practice requirements to make sure they qualify under the definition, in order to protect their referrals under the in-office ancillary services exception.

Penalties for violating Stark can be quite harsh.  They include denial of payment, refund of payment, imposition of a $15,000 per service civil monetary penalty and imposition of a $100,000 civil monetary penalty for each arrangement considered to be a circumvention scheme.

Learn More – Primary Sources:

Fraud & Abuse Laws | Office of Inspector General | Government Oversight | U.S. Department of Health and Human Services (hhs.gov)

Becker’s Hospital Review: 15 Things to Know About Stark Law

Stark Law Website

Training community hospital residents for a future in the hospital’s community – what program directors should know about Stark Laws

AAFP: The Stark Truth About the Stark Law: Part I

CMS: Code List for Certain Designated Health Services (DHS)