Stark Law

The federal statute dealing with physician self-referral is generally referred to as the 'Stark Law'. Under this law, if a physician or a member of a physician's immediate family has a financial relationship with a health care entity, the physician may not make referrals to that entity for the furnishing of designated health services under the Medicare program. Congressman Pete Stark of California first proposed the federal law in 1988; it was enacted by Congress in 1989 and became known as 'Stark I'. The Stark I law applied only to clinical laboratory services and became effective in 1992. Subsequently, Congress significantly expanded the Stark statute to cover a long list of designated health services in addition to clinical lab services. These amendments, which became effective in 1995, became known as 'Stark II'. The lists of designated health services and financial relationships addressed by this statute are extraordinarily broad; the second phase of the Stark II regulations also includes certain Medicaid Managed Care arrangements.

Generally, to determine whether the Stark statute applies to a particular arrangement, three questions must be answered. First, does this arrangement involve a referral of a Medicare or Medicaid patient by a physician or an immediate family member of a physician? Second, is the referral for a 'designated health service'? Third, is there a financial relationship of any kind between the referring physician or family member and the entity to which the referral is being made? If the answer to any question is 'no', Stark does not apply. If the answers to all three questions are 'yes', then it is necessary to determine whether the arrangement falls within a statutory exception. If it does, then the Stark Law does not apply. If the activity is not a recognized exception under the statute, then Stark does apply to the situation and the referral would violate federal law. Violations of Stark can result in civil penalties, denial of payments for the services provided in violation of Stark, and exclusion from participation in Medicare, Medicaid, or any other federal healthcare program.

A common misconception is that the Stark law is the same as the anti-kickback statute. They are different laws, in different titles of the Social Security Act and different in scope. While the Stark statute pertains only to physician referrals under Medicare and Medicaid, the anti-kickback statute is much broader and affects anyone engaging in business with a federal health care program. The Stark statute does not require bad intent; a tainted financial relationship violates the Stark law regardless of good intentions. In contrast, the anti-kickback statute requires specific intent and violations may result in criminal actions.

Source: Alice G. Gosfield, "The Stark Truth About the Stark Law, Part I," Family Practice Management 10:10 (2003): 27-33; Alice G. Gosfield, "The Stark Truth About the Stark Law, Part II," Family Practice Management 11:2 (2004): 41-45.

Return to Issues & Concepts

Return to For the Public - Table of Contents

Return to For Affiliates - Table of Contents

© 2007 Ascension Health