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A Stark Law Primer for Physicians

In most professional practices, referrals from friends, family and colleagues are an important part of bringing in new business. However, physicians must be careful because federal legislation known as the Stark Law makes it illegal for them to refer patients to colleagues or organizations with which they have certain financial relationships. While the law is meant to cut down on abuse of the Medicare and Medicaid systems, its breadth makes it easy for providers to run afoul of the statute.

The Stark Law, situated at Title 42, Section 1395nn of the United States Code, prohibits a physician from making referrals and the person receiving the referral from billing Medicare or Medicaid if any of the following apply:

  • The physician has an ownership or investment interest in the entity receiving the referral
  • The physician has an arrangement that provides compensation to the physician or a member of the physician’s immediate family from the entity receiving the referral

While these prohibitions are very broad, numerous exceptions apply and can serve as an affirmative defense by doctors accused of violating this law. Some key Stark exceptions include the following:

  • The existence of a bona fide employment relationship between the physician and the entity receiving the referral
  • Referrals between physicians in the same practice
  • Cases when a large, publicly traded entity receives the referral and the doctor’s ownership or investment interest is of a kind available to the general public

However, even these exceptions require an analysis of multiple issues to ensure that the physician or practice truly comes within the exception. After all, this law is not a toothless government regulation. In fact, a Daytona Beach hospital recently entered an $85 million dollar settlement with the U.S. Department of Justice over violations of the Stark Law. Therefore, if you are a physician concerned about your referral practices or if you have been contacted about Stark Law violations, you should consult with a Jacksonville healthcare law attorney or a Jacksonville attorney practicing in the area of physicians’ legal services immediately.

Jacksonville, Florida healthcare attorney Andrea Jevic also contributed to this blog post.

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