Stark has three separate provisions that govern phycician self-referral for Medicare and Medicaid patients. Physician self-referral is the practice of a physician referring a patient to a medical facility in which he/she has a financial interest, be it by ownership, investment, or a structured compensation arrangement. It is alleged that the arrangement is likely to give rise to an inherent conflict of interest, given the physician’s position to benefit from the referral. Such arrangements may encourage over-utilization of services and may result in sky-rocketing of health care costs. In addition, it could create a captive referral system that limits competition by other providers. Precisely the problems are not widespread and in many cases, physician investors are responding to a demonstrated need which would otherwise not be met, particularly in a medically underserved area.
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