How the Stark Law Impacts the Treatment of Sleep Apnea

Diagnosis and treatment separated for Medicare and Medicaid beneficiaries

Healthcare fraud laws exist to prevent the financial abuse of patients. In particular, the Stark Law has been implemented to prohibit self-referrals that enrich physicians to the detriment of those in their care. How does the Stark Law influence the practice of sleep medicine? Discover how regulations restrict the provision of both diagnostic testing and treatment of sleep apnea in patients covered by federal healthcare programs like Medicare and Medicaid.

Man fitting himself with mask for sleep apnea
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Laws Exist to Prevent Fraud

In order to prevent abuse and fraud in patients at the hands of their healthcare providers, federal and state governments within the United States have adopted specific laws. One of the earliest, known as the Federal False Claims Act, dates back to the time of the Civil War. Anti-kickback regulations exist to prohibit any person from paying or receiving money or other items of value for referral of a healthcare service. Since 1989, the Stark Law has also restricted self-referrals from physicians and this statute can impact the treatment of sleep apnea.

What Is the Stark Law?

In its simplest terms, the Stark Law prohibits physicians from referring their patients to entities in which the physicians (or their immediate families) have an ownership or other financial interest. It is sometimes called the Stark self-referral law.

This restriction impacts designated health services, but only if these services are reimbursed by Medicare, Medicaid, or another federal healthcare program, like Tricare (used by armed services personnel).

This is a federal regulation and many states have elaborated similar laws that impact the reimbursement of products or services through government-funded health insurance programs. In some states, even self-referral of private-pay patients to entities owned by the physician may be unlawful if there is a compensation arrangement not covered by an exception.

These regulations have been updated several times since their inception. In 2008, the Centers for Medicare and Medicaid Services (CMS) released a statement affecting the joint provision of testing for sleep apnea and its treatment, including the issuance of continuous positive airway pressure (CPAP) therapy and oral appliances.

This update restricted the affiliations between the sleep test provider and the CPAP supplier. CMS believes that there is the potential for self-interest in the result of the testing if there exists an incentive to test more frequently than is medically necessary and to interpret a test result with a bias that favors reimbursed treatment. As such, any individual or company cannot perform both services for patients covered by a federal healthcare program.

As a result of this change, CMS adopted a special payment prohibition to curtail this potential for abuse in 2008. Medicare cannot pay a durable medical equipment (DME) supplier for CPAP if the supplier has an affiliation with the provider of the sleep test from which the diagnosis of sleep apnea was made. This affiliation refers to any relationship between parties with a compensation or ownership arrangement. Therefore, someone cannot both test you for sleep apnea and then sell you the CPAP device and have Medicare pay for it. However, like any rule, there are some exceptions.

Equipment Covered, Not All Testing

First, it should be noted that this special payment prohibition only applies for home sleep apnea testing. If the patient undergoes a diagnostic polysomnogram, performed as an overnight study in a testing center, the restriction does not apply, even if a financial affiliation exists. For most, the greatest impact of the Stark Law is on the provision of CPAP equipment and oral appliances for the treatment of sleep apnea.

Under the U.S. Food and Drug Administration’s rules, CPAP is a prescribed medical device that is classified as an item of durable medical equipment. These specific designations are important for state law regulatory and insurance reimbursement purposes.

The equipment covered by the Stark Law prohibition includes:

  • CPAP and bilevel devices
  • Masks
  • Tubing
  • Humidifiers
  • Water chambers
  • Filters
  • Oral appliances
  • Oxygen therapy

Physicians, dentists, and other healthcare providers may not refer a patient to a DME supplier if that individual (or his or her immediate family) has an investment or compensation interest—if the supplier requests payment for the item from a government health care program. In practical terms, a physician cannot furnish a CPAP to a patient within the medical office in this context.

Understanding the Stark Law Through Cases

Let’s consider a few cases of how the Stark Law may impact the provision of treatment for sleep apnea:

  • An entrepreneur recognizes that sleep apnea is a common condition and that the reimbursement for CPAP equipment makes for a potentially lucrative business venture. She decides to create a company that will send out home sleep apnea testing equipment. If the test is positive, as interpreted by a board-certified sleep physician, she will sell either prescribed CPAP or oral appliances directly to the patient. Unfortunately, the Stark Law prevents reimbursement for any patients who participate in a federal healthcare program. These patients would need to be excluded.
  • An unsavory character tries to devise a scheme to work around the Stark Law. He tests patients but then tells those with Medicare that their CPAP will not be covered by their insurance. He requires them to pay for the equipment out of pocket, even though they would have had coverage had they gone to another independent DME supplier. The patients catch on when they leave to another provider and file complaints that lead to legal action against him.

Exceptions and Penalties

It is important to recognize that the Stark Law does not apply to all insurance, specifically to private pay insurers or to self-payments.

There also may be exceptions for rural providers as resources may not exist for unaffiliated provisions. Rather than punishing patients for a lack of access, physicians may be able to furnish CPAP to their own patients within the same office.

There are a variety of penalties available when providers violate the Stark Law. The payments may be denied and refunds may be ordered in the amount collected in violation of the statute. In addition, civil penalties of up to $15,000 for each claim for a service that is forbidden may be assessed. If a physician attempts to circumvent the law with an evasive arrangement, the civil money penalty jumps to $100,000 for each such scheme.

A Word From Verywell

These laws exist to protect patients from unscrupulous types who would take financial advantage of a vulnerable population. Most providers are not out to make a fast buck and behave in ethical ways to best serve their patients. Unfortunately, these legal restrictions may be necessary to punish those who do not put their patients first. There may be further changes in the law, but if you feel like you have been taken advantage of, reach out to the Office of the Inspector General at the U.S. Department of Health and Human Services by calling (800) 447-8477.

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