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The Stark Act

The Stark Act, 42 U.S.C. § 1395nn, is a piece of legislation that was enacted to combat kickbacks to physicians for the referral of lab tests.  Elsenety v. Health Care Fin. Admin., 85 Fed. Appx. 405, 409 (6th Cir. 2003).  The Act prohibits physicians from making referrals to (and laboratories from billing) Medicare for services ordered by physicians who have a financial interest in the laboratory.  See 42 U.S.C. § 1395nn(a); Atl. Urological Assocs., P.A. v. Leavitt, 549 F. Supp. 2d 20, 22-23 (D.D.C. 2008).

The first Stark law, commonly known as “Stark I,” was in effect between January 1, 1992 and December 31, 1994. United States ex rel. Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899, 901-902 (5th Cir. Tex. 1997).  Stark I prohibited physicians from referring Medicare patients to an entity for clinical laboratory services if the referring physician had a nonexempt “financial relationship” with such entity. 42 U.S.C.A. § 1395nn(a)(1)(A).  Stark I also prohibited the entity from presenting or causing to be presented a Medicare claim for services furnished pursuant to a prohibited referral.  42 U.S.C.A. § 1395nn(a)(1)(B).  Congress later expanded the Stark Act to include referrals for certain “designated health services” under both Medicare and Medicaid to healthcare providers including hospitals.  United States ex rel. Villafane v. Solinger, 543 F. Supp. 2d 678, 684 (W.D. Ky. 2008).  Stark II became effective January 1, 1995, and prohibits physicians from referring Medicare patients to an entity for certain “designated health services” (“DHS”) including inpatient and outpatient hospital services, if the referring physician has a nonexempt “financial relationship” with such entity.  42 U.S.C. § 1395nn(a)(1), (h)(6).

DHS refers to the following services (other than those provided as emergency physician services furnished outside of the U.S.) as they are defined in the section: (i) Clinical laboratory services, (ii) Physical therapy, occupational therapy, and speech-language pathology services, (iii) Radiology and certain other imaging services,(iv) Radiation therapy services and supplies, (v) Durable medical equipment and supplies, (vi) Parenteral and enteral nutrients, equipment, and supplies,(vii) Prosthetics, orthotics, and prosthetic devices and supplies, (viii) Home health services, (ix) Outpatient prescription drugs, and (x) Inpatient and outpatient hospital services. See 42 CFR 411.351.  The regulation also provides that except as otherwise provided, DHS means only DHS payable, in whole or in part, by Medicare. Id.  DHS do not include services that are reimbursed by Medicare as part of a composite rate, except to the extent that the above listed services are themselves payable through a composite rate. Id. See also 42 USCS § 1395nn (h) (6).

Like its predecessor, Stark II provides that the entity may not present or cause to be presented a Medicare claim for services furnished pursuant to a prohibited referral, and expressly prohibits payment of Medicare claims for services rendered in violation of its provisions. 42 U.S.C. § 1395nn(a)(1), (g)(1).  In this regard, “[m]edicare conditions payment of a claim upon a claimant’s certification of compliance with the Stark laws.”  See United States ex rel. Thompson v. Columbia/HCA Healthcare Corp., 20 F.Supp.2d 1017, 1042 (S.D. Tex. 1998).  Congress enacted Stark to address the strain placed on the Medicare Trust fund by the over utilization of certain medical services by physicians who, for their own financial gain rather than their patients’ medical needs, referred patients to entities in which the physicians held a financial interest. United States ex rel. Kosenske v. Carlisle HMA, Inc., 2007 U.S. Dist. LEXIS 84294, 17-18 (M.D. Pa.  2007).

Inside The Stark Act