Stark Law and Anti-Kickback Violations

stark law and anti-kickback violations

State Attorney General’s Officers, the FBI, and other law enforcement agencies have dedicated teams that solely investigate financial practices of doctors’ offices and health care providers, including looking for Stark Law and Anti-Kickback Violations. Once such an investigation commences it is important to be proactive and establish a lack of culpability or at least attempt to mitigate criminal and civil exposure. It is also important to start making a case to Assistant United States Attorneys and investigating agencies on the front end of an investigation.

Stark Law

The legislation is named after its sponsor, Pete Stark, and it prohibits physician self-referral. “Physician self-referral is the practice of a physician referring a patient to a medical facility in which he has a financial interest, be it ownership, or a structured compensation arrangement.”

The practice is proscribed under 42 USC 1395nn. This statute calls for a potential civil fine of up to $15,000 for each instance of self-dealing.

The number of professionals, combined with the number of venues for treatment (hospitals, offices, or clinics) creates a myriad of commercial opportunities. For example, one particular doctor may have the right to perform services at multiple hospitals. In addition to providing treatment, that doctor may order treatment at a particular facility to be performed by a third party. This is where the Stark Law comes into play. Put simply, this law is meant to address inherent conflicts of interest.

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Also presenting challenges for politicians and taxpayers is the fact that oftentimes doctors themselves have ownership interests in various clinics or hospitals.

It is also important to recognize that this law not only prohibits self-dealing in terms of medical treatment but also includes referrals for ‘designated health services’ which include

(A) Clinical laboratory services.

(B) Physical therapy services.

(C) Occupational therapy services.

(D) Radiology services, including magnetic resonance imaging, computerized axial tomography scans, and ultrasound services.

(E) Radiation therapy services and supplies.

(F) Durable medical equipment and supplies.

(G) Parenteral and enteral nutrients, equipment, and supplies.

(H) Prosthetics, orthotics, and prosthetic devices and supplies.

(I) Home health services.

(J) Outpatient prescription drugs.

(K) Inpatient and outpatient hospital services.

(L) Outpatient speech-language pathology services.

A simple example of self-referral includes a doctor calling for a patient to get a blood draw at a particular hospital where that doctor may have an ownership interest. While the doctor may not be directly paid for that bloodwork, he or she indirectly receives a benefit related to the revenue of the hospital he or she partially owns. This is the conflict of interest that proponents of this law claim drives up the costs of healthcare and stifles competition.

Stark Law penalties are serious and can have a massive financial impact upon medical practitioners. First, the civil fines are substantial. Second, Medicaid and Medicare may take administrative steps to revoke access to their billing systems which could cripple the provider’s business altogether.

Improper Direct Compensation and Kickbacks

Self-dealing is not identical to criminal activities that are the subject of federal prosecutions. For example, the recent Toussaint case involving 21 persons accused of fraud under a conspiracy indictment in Dallas, is a case involving allegations of improper financial practices by healthcare providers. Unlike Stark Law cases. This matter involves improper direct compensation and is not merely civil in nature.  These cases involve alleged violations of anti-kickback statutes and bribery.

Though similar, bribes and kickbacks are criminal violations under 42 U.S.C.A. § 1320a-7b. These statutes do not specifically address self-dealing but rather prohibit the practice of paying fees to persons for requesting medical services. For example, if a healthy person seeks home health services under the Medicaid program and is paid $50 each time a nurse visits his or her home by a company that bills Medicaid several hundred dollars to the U.S. Government for each visit, is helping to violate this law. Any knowing participant of the home health company, as well as any physician who knowingly represents to the Government that such services are necessary (knowing that they aren’t) would also be in violation of the statute and exposed to a potential 5 year term of imprisonment.

Anti-Kickback Statute and Stark Law Violations

A comparison chart regarding anti-kickback statutes and Stark Law.

THE ANTI-KICKBACK STATUTE (42 USC § 1320a-7b(b))THE STARK LAW (42 USC § 1395nn)
Prohibits offering, paying, soliciting or receiving anything of value to induce or reward referrals or generate Federal health care program businessProhibits a physician from referring Medicare patients for designated health services to an entity with which the physician (or immediate family member) has a financial relationship, unless an exception applies. Prohibits the designated health services entity from submitting claims to Medicare for those services resulting from a prohibited referral.
Referrals from anyoneReferrals from a physician
Any items or servicesDesignated health services
Intent must be proven (knowing and willful)No intent standard for overpayment (strict liability). Intent required for civil monetary penalties for knowing violations.
Criminal Penalty: Fines up to $25,000 per violation. Up to a 5 year prison term per violation.
Civil/Administrative Penalty: False Claims Act liability · Civil monetary penalties and program exclusion · Potential $50,000 CMP per violation · Civil assessment of up to three times amount of kickbackOverpayment/refund obligation · False Claims Act liability · Civil monetary penalties and program exclusion for knowing violations · Potential $15,000 CMP for each service · Civil assessment of up to three times the amount claimed
All federal healthcare programs.Medicare/Medicaid.

For physicians, nurses, and other professionals, including office staff, facing either of these types of investigations, it is important to treat them as seriously as any other federal offense. Speaking with investigators can result in the disclosure of information that may be interpreted in ways that could be used against the individual at a later time. It is also important to ensure that documents and records within a particular health provider’s office are thoroughly reviewed to ensure the Government’s investigators correctly understand them. It is also important for defense professionals to begin compiling evidence showing a lack of intent to self-deal or absence of any illegal remuneration being sent or received by the target of the investigation. Further, it is necessary for such practitioners to take steps to challenge the methodology used by investigators to establish any improper financial relationship or transaction.


Benson Varghese

Managing Partner at Varghese Summersett PLLC
Benson Varghese is the founder and Managing Partner of Varghese Summersett PLLC. He is a prolific writer and has authored hundreds of articles about criminal law in Texas and at the Federal level. His articles have been featured in the Wall Street Journal, Above the Law, and have been selected as Top Blogs by the State Bar of Texas. He was named the Young Lawyer of the Year in 2019 by the Tarrant County Bar Association. Benson led the firm to become one of the 500 fastest growing businesses in the United States by Inc 500 Magazine in 2018. In the same year, the firm was named the Best Law Firm in Fort Worth by the Fort Worth Star-Telegram. The lawyers at Varghese Summersett PLLC exclusively handle criminal defense matters.
Benson Varghese