How the Stark Law Impacts Patients

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When it comes to healthcare-related laws, one of the most important and often most difficult laws to understand is the Stark Law. Named after the law's sponsor, U.S. Representative Pete Stark of California, this law is also known as the physician-referral law.

Initially, the Stark Law was designed to prevent doctors from referring Medicare and Medicaid patients for additional tests or lab services if the physician (or a relative of the physician) had a financial interest in the company performing the tests. The concern was that doctors were more likely to order tests, or designated health services (DHS), if they stood to gain financially from the additional tests.

Some of the designated health services that the Stark Law covers include: clinical laboratory services, physical therapy, occupational therapy, radiology, radiation and supplies, durable medical equipment and supplies, prosthetics, orthotics, home health services, speech pathology services, inpatient hospital services, and outpatient hospital services. If patients need these services, doctors cannot refer them to facilities where they have a financial interest.

The Challenges the Stark Law Poses

Since its inception in 1989, the Stark Law has been revised and expanded. The revisions, which took place between 1992 and 2007, are commonly referred to as Stark I, Stark II, and Stark III. Consequently, the law has become quite lengthy and complying with the law has become somewhat of a challenge for physicians.

What's more, the Stark law is a strict liability law. What this means is that the intent of the physician is not taken into account when scrutinizing referrals. As a result, a doctor can be found guilty of violating the law without intending to do so.

Under the Stark law, If a physician makes a referral and none of the law’s exceptions are met, then the Stark law has been violated. And this can be very costly. In fact, physicians can potentially be charged up to $25,000 per violation plus up to three times the amount claimed from Medicare.

Other ramifications could include being required to refund every payment that was received for services, a $100,000 civil penalty for trying to circumvent the law and exclusion from federal health care programs. Physicians may even face additional liability under the Federal False Claims Act. The Federal False Claims Act, which is sometimes called the Lincoln Law, is a federal law that imposed liability on people or companies who defraud government programs like Medicare. This act is the government's primary tool for combatting fraud against the government.

Critics of the Stark Law argue that physician referrals to physician-owned entities is not widespread. What's more, they claim that doctors who own or invest in medical facilities are responding to a need within the community that would otherwise not be met. They also maintain that physician-owned entities are many times a lower-cost alternative.

The Purpose of the Stark Law

The original law was fairly simple and straightforward. Its purpose was to ban physician self-referral for DHS when a patient was covered by Medicare or another government payer. The thinking is that physician self-referral represents a conflict of interest because the doctor benefits from their own referral.

Consequently, many who support the Stark Law believe that without it, physicians might engage in an over utilization of services. This practice would in turn drive up healthcare costs. What's more, they believe it would create a captive referral system which could harm competition by other providers.

There is also concern that without the Stark Law, medical decision making would be focused on steering patients toward certain tests and facilities rather than on putting the patient and his needs first. This would then in turn corrupt the healthcare decisions made and put patients at risk.

How the Stark Law Impacts Patients

With the Stark Law in place, most proponents believe that it keeps physicians from ordering unnecessary tests. Additionally, they say it helps keep healthcare costs from rising unnecessarily and promotes competition by discouraging monopolies on services. It also ensures that healthcare decisions are not influenced by the possibility that the physician could benefit from the additional testing.

On the other hand, though, critics worry that if a patient lives in a small community and requires specific tests this may put them at a disadvantage especially if the only option is a doctor-owned facility. In situations like these, the patient may be required to drive long miles to get testing because his doctor cannot refer him to the community's facility because the doctor has a financial interest in that facility. What's more, if the patient does not have transportation or the money to drive to another facility, he may never get the healthcare he needs. As a result, the Stark Law can put some patients at risk for not receiving adequate healthcare.

Furthermore, critics are also concerned that the Stark Law is inhibiting modernization. In one example brought before Congress, a medical group wanted to provide free genetic counselors in private obstetricians' offices. These counselors would be consulted when the doctor discovers that a fetus will die at birth or shortly after. Even though the service would have benefitted the patients by providing additional answers and testing, under the Stark Law the counselors would be considered a benefit to the private obstetrician.

A Word From Verywell

Overall the original concept of the Stark Law was to protect Medicare patients from being taken advantage of by physicians who might stand to benefit from referrals for testing. But with all the changes and modifications to the Stark Law, it has become increasingly difficult for doctors to know whether or not they are violating the law. In fact, there are a number of law firms specializing in training doctors about the Stark Law. And there is an option for doctors who unknowingly break the Stark Law.

On the other hand, there are doctors who are aware of the Stark Law and choose to ignore it. If you feel your doctor is intentionally ordering tests because he will benefit from them financially, you can contact the Office of the Inspector General at the U.S. Department of Health and Human Services.

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Article Sources

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