Everything You Need To Know About Stark Law

Amber Ratcliffe
doctor talking with patient

In 2023, three ASCs paid $83 million to settle Stark Law lawsuits, according to Becker’s Healthcare. That staggering number should be enough to prompt all healthcare organizations to reconsider how they’re protecting themselves against violations.

By removing any incentive for financial gain from the referral of services, Stark Law ensures physicians act in the patient’s best interest. The idea is for physicians to avoid the stigma of the “used car salesman.” They want to get you into a car (any car) so they can record a sale for the month — and they’ll do it by any means possible, for their own benefit. Stark Law was passed to help prevent physicians from falling into the same poor opinion as used car salesmen.

Provide employee training on Stark Law.

What Is Stark Law or Designated Health Services?

The Physician Self-Referral Law — more commonly known as Stark Law — prohibits physicians from referring patients for certain Designated Health Services (DHS) to entities with which they have a financial relationship (unless an exception applies).

Designated Health Services are specific healthcare services listed in the law, including clinical laboratory services, physical therapy, occupational therapy, radiology services, durable medical equipment, and others.

The purpose of Stark Law is to prevent conflicts of interest that could potentially influence healthcare decision-making. It exists to ensure all referrals are based on the best interests of patients, rather than any financial incentive or gain on the part of the physician. Above all, the law aims to promote transparency and fair healthcare practices.

What Are Designated Health Services?

Stark Law has a broad reach when it comes to classifying Designated Health Services. Under the law, DHS generally include the following categories:

  • Clinical laboratory services
  • Physical therapy services
  • Occupational therapy services
  • Radiology services
  • Radiation therapy services
  • Durable medical equipment and supplies
  • Parenteral and enteral nutrients, equipment, and supplies
  • Prosthetics, orthotics, and prosthetic devices and supplies
  • Home health services
  • Outpatient prescription drugs

These categories are broad and encompassing in and of themselves, and it’s important to note that specific regulations and exceptions apply to each category under the law.

Generally speaking, Stark Law covers any and all health services that may impact the delivery of care or the efficacy of patient outcomes. The goal is to give patients peace of mind that when it comes to their health, there’s never any financial incentive for a physician to refer or recommend anything less than optimal.

Recent Updates to Stark Law

The Consolidated Appropriations Act of 2023 update exceptions to Stark Law and Anti-Kickback Law that will allow hospitals and healthcare providers to improve mental health services for physicians.

The Centers for Medicare and Medicaid (CMS) added a waiver (from March 1, 2020 through May 11, 2023) for physician owners of independent freestanding emergency departments that served Medicare patients during the COVID-19 pandemic. The waiver applies retroactively.

In 2023, CMS updated its voluntary self-referral disclosure laws.

Penalties for Violating Stark Law

What happens if you violate the law, even inadvertently? The consequences can range depending on the seriousness of the offense or the number of violations involved. Generally speaking, penalties for improper referral of Designated Health Services can include:

  • Civil Monetary Penalties. The Office of Inspector General (OIG) can impose civil monetary penalties for each violation. As of 2023, the penalty amount is up to $27,018 for each service provided in violation of the law, along with an assessment of up to three times the amount claimed for the services.
  • Exclusion from Federal Healthcare Programs. Individuals or entities found in violation of Stark Law may face exclusion from participation in federal healthcare programs such as Medicare and Medicaid. Organizations that violate Stark Law may also face the loss of Medicare and Medicaid reimbursements.
  • Professional Reputational Damage. Violations can lead to negative publicity and damage to the professional reputation of healthcare providers and organizations. This can result in a loss of patient trust and referrals, impacting the long-term viability of the business.
  • Legal and Investigative Costs. Defending against allegations can involve substantial legal and investigative costs. These costs can be both financially burdensome and time-consuming for individuals and organizations involved.

While understanding and avoiding Stark Law is the best way to minimize the potential for these damages, mistakes happen. That’s why the Department of Health and Human Services established a self-referral disclosure protocol for physicians who inadvertently violate the law, but who want to make it right. In many situations, self-reporting physicians are able to remedy the violation without financial penalty or reputational damage.

Use Education To Maintain Compliance

Education plays a crucial role in maintaining Stark Law compliance within healthcare organizations. Here’s a look at how taking the time to educate physicians and staff on proper referral of Designated Health Services can benefit patients and maintain compliance:

  • Understanding of the law. Education gives healthcare professionals, administrators, and staff a clear understanding of Stark Law, its provisions, and its implications. It’s vital for them to recognize prohibited activities, exceptions, and the potential consequences of non-compliance.
  • Awareness of compliance risks. Education sheds light on the potential risks and compliance challenges related to Stark Law. By understanding the intricacies of the law, healthcare professionals can identify situations that may trigger violations — and take appropriate steps to avoid them.
  • Ethical decision-making. Education fosters ethical decision-making by contextualizing the law — namely, by emphasizing the importance of patient welfare and unbiased referral practices. It provides guidance on identifying and avoiding conflicts of interest that may compromise the integrity of patient care.
  • Documentation and reporting. Proper documentation and reporting practices are an important part of demonstrating compliance with Stark Law requirements and exceptions. Educating staff on thorough, accurate, compliant documentation creates transparency within the organization.
  • Ongoing training and updates. Stark Law, like any other healthcare regulation, undergoes changes over time. Education ensures that healthcare professionals stay updated with any revisions, enabling them to adjust their practices accordingly. MedTrainer actually offers two courses for this purpose: Stark Law and Anti-Kickback Statute and Understanding the Anti-Kickback Statute for ASCs.
  • Collaboration and communication. Education begets understanding, which encourages open communication among healthcare professionals, administrators, and compliance officers. It’s easier to address and prevent Stark Law complications if there’s open discussion about it.

Make it easy for providers in your organization to keep the knowledge, skills, and ethical foundation necessary for Stark Law compliance using a modern learning management system. With online courses they can start and stop at any point, it is easier for them to complete training.


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Use Online Document and Policy Management To Maintain Compliance

Online document and policy storage facilitates Stark Law compliance by providing a centralized and easily accessible platform for healthcare organizations to store, manage, and update their compliance documents, policies, and procedures. This helps ensure they’re readily available for reference, dissemination, and enforcement.

Observing Stark Law is a critical part of healthcare compliance. If you need help centralizing documentation or maintaining internal policies on compliance as healthcare relationships grow and change, MedTrainer can help.

Schedule a demo today and learn how to build compliance safeguards around Stark Law and other critical compliance statutes.