Similarly to the False Claims Act, the Stark Law makes illegal fraud against the government. Stark Law, in particular, prohibits health care fraud. The law was designed to ensure that physicians and hospitals give referrals according to the health care needs of patients, instead of their financial investment.
Stark Law bars physicians from referring patients to designated health services performed by an individual or entity with which they or an immediate family member have a financial relationship. A financial relationship between the physician or their family and the entity may include ownership of the entity by the physician, investment in the entity by the physician, or compensation to the physician for the referral.
Services and items including clinical laboratory services, physical and occupational therapy services, radiology and other imaging services, medical equipment, and outpatient prescription drugs are among the designated health services that are covered under Stark Law.
The law also prohibits filing a claim to Medicare or another third party requesting payment for the designated health services referred in violation of Stark Law.
The consequences for violating Stark Law can be steep. Payment will be denied for the designated health service. If the individual who violated the law received payment, they will be required to refund the amount received. If this payment is not refunded, the violator of the law faces a fine of up to $15,000 for each referred service.
An individual can violate Stark Law not only by engaging in illegal referrals or false claims but also by failing to report violations. Those who are legally required to report the violation but do not do so face a penalty of up to $10,000 for each day that should have been reported. Certain exceptions to the law exist, including, for example, if the physician refers a patient to another physician in the same group practice.1
An example of a Stark Law violation is the 2012 case against a Missouri hospital system. The hospital system provided incentive pay to their physicians based on the money gained from their referrals.2
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