Stark Law in Texas

Texas and Stark Law

Named after Congressman Pete Stark, the Stark Law amended the Social Security Act to limit a referring physician’s ability to refer Medicare and Medicaid patients in ways that benefit the physician. Also known as a self-referral law, it was enacted to fight healthcare fraud and abuse by decreasing the opportunity for a physician to receive kickbacks for referrals.

Financial Relationship

A financial relationship is any ownership, compensation, and/or direct or indirect investment, where a party would benefit financially by referring a patient. It may also include financial interests of the physician’s family. The focus of the Stark Law is on the “financial relationship” between the physician and these Medicare/Medicaid programs, which might fraudulently benefit the referring physician and/or the service provider.

If a referral results in a physician's receiving compensation and/or if a physician is being paid above market value for his or her service, the physician may not be in compliance with the Stark Law.

Stringent Regulations

In cases of fraud, proving the intent of a party is often crucial to the verdict, but that is not the case with the Stark Law, which does not consider the physician’s intent. Health care is strictly regulated, and complying with those regulations is not always easy. Increasingly, hospitals are acquiring more physicians, practices, and services, complicating compliance with the Stark Law. A referring physician may accidentally fail to follow the Stark Law, yet still accrue fines and penalties. If the physician benefits financially from a referral to a lab, for example, the physician likely has not followed the Stark Act and may be fined and penalized even if the physician can prove that he or she was unaware of any benefit resulting from a referral.

Because of the complexities of the laws and the severity of the penalties, physicians and other health care professionals must evaluate billing practices, contracts, and referring services to ensure their compliance and, to be safe, even the appearance of violations

Harsh Penalties

Failure to comply with the Stark Law has profound consequences. Violations may result in a fine of up to $15,000 per referral and three times the amount of overpayment the physician receives. Physicians who realize after the fact that their violation of the Stark Law have up to 60 days to report those violations. Although being unaware of noncompliance does not protect the physician, penalties may be substantially higher if fraudulent intent is evident. Noncompliance may even lead to civil and criminal investigations, causing long-term damage to professional standing.

Exceptions to Stark Law

While the regulations are rigorous, the Stark Law does provide exceptions for such situations as those involving physician employment agreements, referrals to professionals in the same medical group, referrals with pre-paid health plans, and personal service plans. However, these exceptions usually apply to “certain types” of these interactions, further complicating compliance with the Stark Law.

Compliance with the many regulations of the healthcare industry is quite difficult, but noncompliance can have devastating consequences, financially and professionally. Working with a business attorney familiar with health care regulations is crucial for a healthcare professionals trying to navigate the complexities of Stark Law.

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