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History of Stark Law

The law is named after United States Congressman Pete Stark, who sponsored the initial bill in 1989.  The federal physician self-referral law, normally known as the “Stark Act,” generally prohibits physicians and other healthcare professionals from referring their Medicare and Medicaid patients to facilities in which they or their immediate family members have an ownership or other investment interest. The idea behind the Stark Act is that, if physicians are permitted to make such “self-referrals,” they will make more referrals than are actually medically necessary, resulting in over-utilization of the system and an unwarranted draining of the taxpayer’s pocket. The Stark Act contains a number of exceptions to its general prohibition, including exceptions for such matters as space and equipment leases and physician recruitment, as long as certain requirements are met.

Congress included the “Stark I” provision in the Omnibus Budget Reconciliation Act of 1989 (OBRA 1989) which barred self-referrals for clinical laboratory services under the Medicare program, effective January 1, 1992. The law included a series of exceptions to the ban in order to accommodate legitimate business arrangements. A number of observers recommended extending the ban to other services and programs. Thereafter, the Omnibus Budget Reconciliation Act of 1993 (OBRA 1993) expanded the restriction to a range of additional health services and applied it to both Medicare and Medicaid. This legislation, known as “Stark II,” also contained clarifications and modifications to the exceptions in the original law. Minor technical corrections to these provisions were included in the Social Security Amendments of 1994.

The passing of Stark II raised a series of concerns on the part of many provider groups. Stark I and II were intended to remove potential conflicts of interest from a physician’s decision making. However, a number of persons have argued that the legislation, particularly parts of Stark II, represents an unwarranted intrusion into the practice of medicine. They argue that the legislation, particularly the provisions relating to compensation arrangements are too complex and may impede physicians’ ability to participate in managed care networks.

On November 20, 1995, Congress gave final approval to the conference report on the Balanced Budget Act (BBA) of 1995, but President Clinton vetoed it on December 6, 1995. The Balanced Budget Act (BBA) of 1995 included several amendments to the physician self-referral provisions. The two major changes were the repeal of those prohibitions based on compensation arrangements and the reduction in the list of services subject to the ban.

The Phase III final rule was published on September 5, 2007, at 72 FR 51012, and became effective December 4, 2007.  Certain provision of “Stark III” will be delayed up to one year (December 4, 2008) and Stark II will remain in effect through that date.

The Stark Law is related to, but not the same as the federal Anti-Kickback law.

Inside History of Stark Law