STARK LAW VIOLATIONS

Reporting Stark Law violations is the right thing to do and can lead to a significant whistleblower award. A Stark Law violation occurs when a doctor refers patients to another healthcare provider when he or she has a financial relationship with the provider. The federal law which prohibits such referrals is often referred to as the Stark Law.

Our whistleblower attorneys have successfully represented clients in whistleblower matters across the United States. Our firm has offices in Atlanta GA, Alexandria VA, and Washington DC, and we frequently travel to other federal courts to help whistleblowers recover rewards.

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To guard against improper financial relationships in healthcare, the federal government allows whistleblowers with knowledge of a Stark Law violation to file lawsuits against healthcare providers under the False Claims Act.

The “Stark Law” is actually a set of federal laws which prohibit, with some exceptions, physician self-referrals for Medicare and Medicaid patients. A physician self-referral occurs when a doctor refers a patient for certain services to a medical facility where the doctor has a financial interest. This prohibition of physician self-referrals also extends to members of a doctor’s immediate family who have a financial interest in a medical facility. As an example, a doctor who refers an elderly patient to a physical therapy facility in which the doctor has a financial stake likely violates the Stark Law.  

There are several exceptions to the prohibition of physician self-referrals which are discussed below. The Stark Law is also similar to, but different from, the Anti-Kickback Statute (AKS). To determine if a Stark Law violation has occurred, a False Claims Act attorney should be consulted.

The Stark Law generally prohibits doctors from referring Medicare and Medicaid patients to another provider if the doctor has an ownership or investment interest in the provider. There can also be a violation if the doctor has a compensation arrangement with the provider. The Stark Law prohibits financial relationships that are both direct and indirect in nature. As mentioned above, there are numerous exceptions that apply to this general rule, and an experienced False Claims Act attorney should be consulted to determine if there is in fact a violation.

Physician self-referrals are prohibited under the Stark law for “designated health services.” Designated health services include the following services:

• Clinical laboratory services
• Physical therapy services
• Occupational therapy services
• Out-patient speech-language pathology services
• Radiology and certain other imaging services
• Radiation therapy services
• Durable medical equipment
• Prosthetics
• Home health services
• Outpatient prescription drugs
• Inpatient and outpatient hospital services

Reporting a Stark Law violation may not be possible in some cases, even when there is a financial arrangement. There are many exceptions to the Stark law that allow physicians to make referrals for designated health services. Some of the more common exceptions are discussed below. It is important to note that a financial relationship may still be illegal under the Anti-Kickback Statute even if it appears to otherwise satisfy an exception under the Stark law.

• The in-office ancillary services exception: This is one of the most common Stark law exceptions. This exception allows a doctor to refer a patient to another provider in the same practice group, but it comes with several strict conditions, including the type of service being performed, the location of the service, and who may perform the service. There is also an additional requirement that the practice must qualify as a bona fide “group practice.”

• Office space rental: Doctors are permitted to lease office space if certain conditions are met, including a written lease and a lease term of at least one year. The lease itself must also be commercially reasonable. Similar conditions apply for the rental of medical equipment.

• Preventative services: Doctors are generally permitted to refer patients for vaccines, immunizations, and screening tests if certain conditions are met

• Physician recruitment: The Stark law recognizes that hospitals need to recruit top talent, which means spending money on doctors. For this reason, a hospital can spend money on a physician for purposes of recruitment if the agreement is in writing, there is no requirement that the doctor has to refer patients, and the amount paid by the hospital is not connected to the value of any referrals.

• Non-monetary exception: This exception allows a physician to be paid a non-monetary payment of up $300 per year if the payment was not solicited and the payment is not related to any referrals.

• Fair market value compensation: This exception is often considered to be a catch-all when other exceptions may not apply. This exception allows for referrals when there is a written agreement that clearly defines how compensation will be paid, there is a defined timetable, the transactions are commercially reasonable, and the services are lawful and do not violate the Anti-Kickback Statute.

If you suspect that a doctor is referring patients to a medical facility where the doctor has a financial relationship, you can blow the whistle by filing a lawsuit under the False Claims Act. We have found that the following steps are helpful in blowing the whistle on Stark law violations.

1. Identify the parties: The first step is to sort out who is making the referrals and who is accepting the referrals.

2. Identify the financial incentive: The improper financial incentive is the heart of every Stark violation. What is the doctor getting in exchange for the referral? In many cases, a doctor and a medical facility will have a written contract describing the financial incentive. In other cases, there may be emails or correspondence explaining how much a doctor is being paid and whether that amount is dependent on the value or volume of referrals.

3. Identify specific referrals and payments: To be successful, False Claims Act cases often require that the whistleblower be able to point to specific instances of misconduct. It is extremely helpful if there are documents showing actual referrals of patients to medical facilities and actual payments from facilities to medical doctors.

4. Contact a False Claims Act attorney experienced in Stark violations: Determining if healthcare referrals violate the Stark law is often a difficult task as there are many exceptions under the law. A False Claims Act attorney will review all of your information to help determine if an individual or company is violating the law.

5. File your whistleblower lawsuit: Your attorney will conduct a thorough review of the information you provided and conduct his or her own investigation. If your attorney believes that you have a strong case and that filing a lawsuit is in your best interest, he or she will file a lawsuit under the False Claims Act in federal court. The government will then investigate your case and decide whether it should pursue the fraud. If your False Claims Act case is successful, you are entitled to recover between 15 to 30% of the amount recovered by the government.

Recent years have a seen a drop in the number of False Claims Act cases that involve only Stark law violations. In fact, the Centers for Medicare & Medicaid Services (CMS) announced a steep decline in settlements involving Stark violations since 2016. But there are still plenty of high dollar False Claims Act cases involving Stark violations, and the Stark law remains a critical tool in the war on healthcare fraud.

For example, Wheeling Hospital, Inc., in Virginia recently agreed to settle a False Claims Act case alleging Stark violations for $50,000,000. In that case, the hospital had been paying referring physicians based on the volume of the physicians’ referrals. The Department of Justice alleged that the practice has been going on for more than ten years before a whistleblower finally put an end to it. For his efforts, the whistleblower received a $10,000,000 award.

Similarly, in July 2020, Oklahoma Center for Orthopaedic and Multi-Specialty Surgery settled alleged Stark law violations for $72.3 million. The case again centered around improper physician referrals that were induced by money and investment opportunities. As with these recent settlements, we typically see False Claims Act lawsuits that include both Stark violations and violations of the Anti-Kickback Statute. Being able to pursue a healthcare provider on both grounds creates a more powerful case and, ultimately, can lead to a higher award for the whistleblower.

Frequently asked questions about becoming a whistleblower: