Stark Law Violations Prosecutions
Stark Law: Overview
What is the Stark Law?
The Stark Law, named after Congressman Pete Stark, is a federal statute (42 U.S.C. § 1395nn) aimed at preventing physician self-referral for certain designated health services (DHS) reimbursed by Medicare or Medicaid. It prohibits physicians from referring patients to entities in which they (or immediate family members) have a financial interest, unless an exception applies.
Key Elements of the Stark Law:
Prohibited conduct: A physician may not make referrals for DHS payable by Medicare/Medicaid to an entity with which the physician or an immediate family member has a financial relationship.
Designated Health Services (DHS): Includes clinical laboratory services, physical therapy, radiology, durable medical equipment, home health services, and others.
Strict liability: Stark Law is a strict liability statute—no proof of intent or knowledge is required to establish a violation.
Penalties: Include denial of payment, refunds, civil monetary penalties, and exclusion from federal health programs.
Enforcement: Primarily enforced by the Department of Health and Human Services Office of Inspector General (OIG), Department of Justice (DOJ), and via False Claims Act (FCA) lawsuits.
Prosecution and Enforcement
Violations often come to light through audits, whistleblower complaints, or investigations into billing fraud. Stark Law violations can be prosecuted criminally under related statutes (e.g., False Claims Act) or result in civil penalties.
Case Law Examples
1. United States ex rel. Drakeford v. Tuomey Healthcare System, Inc., 675 F.3d 394 (4th Cir. 2012)
Facts:
Tuomey Healthcare entered into physician contracts that violated the Stark Law by paying above fair market value to physician shareholders for referrals of DHS.
Legal Issue:
Whether physician compensation arrangements that exceed fair market value and are tied to volume of referrals violate Stark Law and result in False Claims Act liability.
Holding:
The Fourth Circuit affirmed liability, emphasizing that improper financial relationships triggering Stark Law violations lead to false claims submitted to Medicare.
Significance:
Confirmed that Stark Law violations can trigger FCA liability, including treble damages and penalties.
2. United States ex rel. Berge v. Board of Trustees of University of Alabama, 104 F. Supp. 3d 1306 (N.D. Ala. 2015)
Facts:
Allegations that the university hospital submitted claims for DHS based on referrals violating the Stark Law due to financial ties.
Legal Issue:
Whether the hospital violated Stark Law and thereby submitted false claims.
Holding:
Court denied defendant’s motion to dismiss, allowing claims alleging Stark Law violations leading to FCA liability to proceed.
Significance:
Illustrated aggressive use of FCA to enforce Stark Law compliance.
3. United States ex rel. Atkinson v. Pa. Urology, Inc., 985 F. Supp. 2d 509 (M.D. Pa. 2013)
Facts:
Physician group allegedly violated Stark Law by referring patients to imaging services in which they had ownership interests, without qualifying exceptions.
Legal Issue:
Whether improper self-referral for imaging services violated Stark Law and False Claims Act.
Holding:
The court allowed claims to proceed, highlighting that ownership interests in entities providing DHS create Stark Law liability if no exception applies.
Significance:
Emphasized strict scrutiny of physician ownership interests in self-referral cases.
4. United States ex rel. Lee v. SmithKline Beecham, Inc., 245 F. Supp. 2d 207 (E.D. Pa. 2003)
Facts:
Case involved pharmaceutical company payments to physicians that allegedly influenced referrals, implicating Stark Law and Anti-Kickback Statute.
Legal Issue:
Whether financial incentives affecting referrals violated Stark Law.
Holding:
Court discussed overlaps between Stark Law and Anti-Kickback Statute, noting that improper financial inducements can implicate both statutes.
Significance:
Highlighted the connection between Stark Law violations and broader healthcare fraud statutes.
5. United States ex rel. O'Connell v. Chapman University, 245 F. Supp. 3d 1167 (C.D. Cal. 2017)
Facts:
Chapman University was accused of violating Stark Law by entering into agreements with physicians that resulted in illegal referrals.
Legal Issue:
Whether contracts between university and physicians created prohibited financial relationships under Stark Law.
Holding:
Court permitted FCA claims based on Stark Law violations to proceed, emphasizing importance of compliance with Stark exceptions.
Significance:
Confirmed liability for institutions that enter into improper compensation arrangements leading to Stark violations.
6. United States ex rel. Woodard v. Baldwin, 733 F.3d 894 (8th Cir. 2013)
Facts:
A physician-owned imaging center was alleged to have violated Stark Law by submitting claims based on referrals from physician-owners.
Legal Issue:
Whether submission of Medicare claims for DHS resulting from illegal referrals violated Stark Law and FCA.
Holding:
The court affirmed that such claims constitute false claims under the FCA and that Stark Law violations can support criminal prosecution.
Significance:
Reinforced that physician ownership without proper exceptions leads to criminal and civil liability.
Summary of Legal Principles
Strict liability statute: No intent required to violate Stark Law.
Violations often trigger False Claims Act liability, leading to significant financial penalties.
Physician financial relationships must fit exceptions (e.g., fair market value, commercial reasonableness).
Courts rigorously enforce compliance, often siding with whistleblowers and government claims.
Overlap exists with Anti-Kickback Statute but Stark Law focuses on self-referral.
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