What is Stark Law and how does it relate to the False Claims Act?

Stark Law is a set of laws that regulate how and under what circumstances physicians can make referrals. The starting point is the doctors cannot refer a patient to any entity where the doctor (or an immediate family member) has a financial interest in the entity and the entity bills Medicare for any treatments or products.

The reason for Stark Law is that doctors should be working to provide the best care for their patient and not putting profits before patient safety. In many cases, the patient’s health and wallet would be better served by referring the patient to a competitor or to an outside entity. These improper referrals are considered a conflict of interest between the patient and the doctor. Referrals to designated entities hurt:

  • The patient
  • The taxpayer
  • Other doctors and medical providers who are playing by the rules

Violations of Stark Law are also considered violations of the False Claims Act because the requests to Medicare and Medicaid are based on the fraudulent referrals.

The term financial interest includes any type of ownership interest or investment or compensation plan.

Designated health services

The types of entities that cannot participate in an improper referral scheme include:

  • Physical therapy services
  • Clinical laboratory services
  • Radiology, MRI, and other imaging services
  • Durable medical equipment and supplies
  • Prosthetics and orthotics
  • Home health services
  • Outpatient prescription services
  • Many other health services and suppliers

The penalties

Stark law is a civil statute. There is no need to show the doctor intended to profit from the relationship. The referral and the financial interest in any designated health facility is an automatic violation of Stark Law. Penalties for Stark Law violations include a denial of the submitted claim, the requirement to pay back any payments from Medicare or Medicaid, statutory penalties which can be up to $15,000 for each violation, treble damages, and exclusion (by the doctor and the designated health entity) from participating in Medicare and Medicaid payment programs. Additional penalties may also apply.

The US Department of Justice has obtained numerous settlements based on Stark Law violations and False Claims Act violations – many for tens of millions of dollars. In many of these cases, a whistleblower helped to alert the Justice Department about the fraudulent self-referrals.

If you are aware of any self-referral medial practice schemes, you may able to file a whistleblower (qui tam) claim. If your disclosure leads to a recovery, you may be entitled to a significant percentage of the recovery. The California Law Offices of Stephen Danz and Associates has the experience and resources to help you pursue your claim. For help now, call us at 877-789-9707 or fill out our online contact form to schedule an appointment.