This law was passed to address issues of healthcare fraud, it focused on physicians who were
referring patients to clinics that they had a financial relationship. The patients that were being
referred by the physicians were covered under the Medicare program. The government
defined financial relationships to include direct or indirect investment or ownership interest
by the physician who is referring the patient to the hospital. The definition of the financial
relationship was defined to include close family members that were involved in the
healthcare business. The stark law did not impose a criminal action to be undertaken those
that were found to be flouting the law but rather it allowed the Office of the Inspector
General (OIG) for the Department of Health and Human Services to pursue the violators of
the said law under a civil suit. If those in violation of the law were found culpable then a fine
was imposed on them by the court of up to $ 15,000.
Is Stark Law a Strict Liability Statute?
Stark Law is a strict liability statute; this, therefore, implies that the proof of a physician’s
intention to violate the law is not necessary. Therefore, those physicians that make the
prohibited referrals for designated health services with or without knowledge will still be held
liable and penalties will be imposed. Physicians who are in continuous violation of the law
will continue to receive hefty fines and if they are not able to stop such actions then they will
Exceptions of the application of the Law
There are several exceptions in certain cases where the law will not be applied to those
physicians that have made a referral for federally-covered designated health services. The
i. In-office Ancillary Service Exception, a group medical practice can make referrals for
in-office ancillary services such as laboratory or radiology services;
ii. Indirect Compensation Exception- indirect compensation arrangements between an
entity and a physical is allowed if the fee/compensation received by the referring
physician is the fee charged at the market rate. The referral does not account for the
volume or value of the referrals. The referral has to be set out in writing and signed
off by the parties;
iii. Fair market Compensation Exception- this exception focuses on the current market
value. This exception provides that the compensation needs to pre-arranged and also it
needs to be in writing. The arrangement needs to have provided for the time frame
that the compensation will materials. The arrangement needs to be commercially
reasonable and meets the safe harbors as provided under the Anti-Kickback Statute.
iv. A non-monetary exception-this exception applies to payment of non-monetary
compensation made to a physician, the maximum amount payable is $300 per annum.
The physician should not have solicited the compensation, further, it does not include
the value or volume of referrals.
Enforcement of the Stark Law
The federal government has used enforcement mechanisms to ensure that the stark law is
implemented or rather adhered to fully. The enforcement that has been used by the federal
government to make sure that the law is followed has been the imposition of fines for those
that have violated the law. The fines being imposed serves as a form of deterrence and
The approach that has been taken by the federal government has made many physicians take
time and learn about the Stark Law. This is because most of the referrals that are being made
by the physicians are critically scrutinized. Therefore, making a single mistake will be
expensive for the physicians, and in certain instances, it may lead to disbarment.
Stark Law vs. The Anti-Kickback Statute
There has been a misconception or rather a misunderstanding on the stark law, where it has
been argued that it is similar to the anti-kickback statute. The laws are not similar as they
seek to serve a very distinct purpose. It will, therefore, be important to have a distinction
between the two laws for clarity purposes:
i. The stark law deals with physician’s referrals under Medicaid and Medicare whereas
the anti-kickback law focuses on anyone dealing or rather engaging in business with
any federal healthcare program.
ii. Stark Law does not focus on bad intent (that is a corrupted financial relationship
violates, it does not focus on intention) on the other hand, the anti-kickback statute
requires intent, although the intention needs to be specific.
iii. The exceptions provided under the Stark Law creates permissible circumstances
where referrals will be allowed. The act is not only strict but it allows for certain
circumstances where the law will not be applied strictly. Whereas the anti-kickback
has provided for transactions that would induce referrals but it does not necessarily
violate the provision of the law. The anti-kickback regulation provides those
transactions that don’t meet a safe harbor don’t necessarily violate the law; the
discretion lies with the prosecutor who will have to evaluate the situation at hand
before deciding if there was a violation or not.
iv. Violation of the Stark law is not a criminal matter but rather civil, therefore the
punishment is usually monetary and punitive whereas the violation of the anti-
kickback is punishable under criminal law, it attracts a fine and also exclusion from
federal health care programs.
It is important to evaluate a situation on a case to case analysis, this will help to identify
which law is supposed to be applied. This is because the application of the tow laws is
intertwined. This is because a party may not be found culpable under the star law but may be
found liable under the anti-kickback. Therefore, it is good to analyze a particular situation to
establish which law is effective in the situation.
The Voluntary Self-Disclosure Protocol
On March 23 rd, 2010, the Affordable Care Act was enacted. The act provides for voluntary
self-referral disclosure protocol (SRDP); the act provides for those that have violated the
Stark Law to disclose it. Section 6409 (b) mandates the secretary of the Department of Health
and Human Services the power to reduce the amount payable for those that have confessed to
violating the Stark Law. Parties that voluntarily disclose the violation of the Stark Law are
likely to get smaller penalties when the action is enforced.
The objective of the SRDP is to provide faster and quick resolution of matters that have been
made by the disclosing party. The party that reports breach of the Stark law is assumed to
have evaluated its action and determined the potential of violating the Stark Law. When the
disclosure is being reviewed, CMS will not determine if there was a violation of any sort.
However, it is important to make sure that the SRDP being made should not be made with ill
intention, this is because if the CMS is forced to investigate and finds that the report was
made with ill intent then the fine that will be accrued will be so high.
In 2017 there were amendments made on the Affordable Care Act, the amendment required
that the disclosing party should use a standardized form when they are submitting their
disclosure. Before this, the disclosing party was supposed to make their disclosure in a
narrative form. The disclosing party was therefore left to tell their narrative in the best way
they could so that they could package it in a manner that would absolve them from any
Four forms were introduced after the amendments, the forms are:
SRDP Disclosure Form- This form provides information that relates to the disclosing
party, part of the information includes the history of the abuse, extensiveness of
noncompliance, and steps to prevent future noncompliance.
Physician Information Form- each physician included includes in the disclosure, the
party disclosing the information must submit a separate physician information form
providing details of the non-compliance of the financial relationship between the
physicians and the disclosing party.
Financial Analysis Worksheet- the purpose of this is to quantify the overpayment for
each physician included in the disclosure who made referrals in violation of the Stark
Certification- the disclosing party is required to sign a certification which provides the
individual signatory’s knowledge, the information provided is truthful and is made on
good-faith efforts to bring the matter to CMS.
In summary, the Stark law was introduced to remedy the abuse by the physicians of referring
patients to other facilities to benefit from the referral. The law was to bring sanity in the
access of healthcare using Medicare, the federal government makes sure that the program is
not abused by rogue physicians. The government has been able to enforce the Stark law by
issuing hefty fines to those that violate. In cases where a party feels that a physician violates a
Stark Law, he or she should make a report to the Center for Medicare and Medicaid Services
where the investigations will be undertaken. If the physician will be found culpable then a
fine will be imposed on the party. If the physician is a continuous offender, then his or her
license can be revoked.