The Stark Law Against Physician Self Referrals

The last twenty years have seen the federal government becoming increasingly involved in the relationship between doctors and their patients. Most recently, the Affordable Care Act (“Obamacare”) has contributed to the uncertainty and concern among medical professionals about the increasing role government will take in the management of individuals’ health care. Doctors, particularly those who accept Medicare and Medicaid patients, must be aware of the landscape of regulations in order to avoid violating the law and suffering potentially catastrophic consequences.

The Origin Of The Stark Law

Like many government regulations, the Stark Law was enacted with good intentions, but it has yielded unintended consequences.[1]

Throughout the 1980s, as new diagnostic and treatment technologies emerged, new opportunities opened for physicians invest in companies that offered these technologies. Increasingly, doctors began investing in laboratories, MRI centers and outpatient surgical centers and referring their existing patients to these facilities.

The Center for Medicare and Medicaid Services (“CMS”), which administers Medicare and Medicaid benefits, became concerned that these referrals were motivated more by profit than patient care. The Stark law, named after Congressman Pete Stark (D-CA) was designed to curb this practice of physician self-referral, which it broadly defined as referring any patient to any entity in which the physician or an immediate family member has an ownership interest.

The first version of the Stark law (“Stark I”) became effective in January 1992.[2]  The restrictions imposed by Stark I were modest, applying only to financial relationships between physicians and clinical laboratories. In 1993, however, Congress enacted a much more comprehensive version of the Stark law (“Stark II”), which became effective on January 1, 1995.[3]  In addition to clinical laboratories, Stark II prohibited doctors from self-referring patients to most types of medical imaging centers and inpatient and outpatient surgical centers.

Shortly after Stark II was enacted, the CMS enacted regulations designed to flesh out the basic components of the law. Due to protests from the medical community, the regulations were rolled out in three phases, with the most recent “Phase III” regulations becoming effective at the end of 2007.[4]  These regulations set out the requirements doctors must meet in order to be in compliance with the Stark Law, as well as the penalties for non-compliance.

In the next blog post, we will discuss the current state of the Stark law and the prohibitions it imposes on doctors practicing in Arizona.  In subsequent posts, we will discuss the penalties imposed for violations, some common exceptions to the Stark law, and how Obamacare has affected the Stark law.  However, if you have specific questions, or think you may have violated the Stark law, it is critical that you speak with an experienced healthcare attorney immediately.

[1] The full text of the Stark Law can be found at 42 U.S.C. § 1395nn.

[2] Omnibus Budget Reconciliation Act of 1989 (P.L. 101-239).

[3]  Omnibus Budget Reconciliation Act of 1993 (P.L. 103-66).

[4] The complete current Stark regulations can be found at 42 C.F.R. § 411.350 through § 411.389.