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Stark Act

The Stark laws, named for the statute's Congressional sponsor, Representative Fortney H. “Pete” Stark, are codified at Title 42 U.S.C. § 1395nn. Under 42 USC § 1395nn, the Stark Act prohibits healthcare entities from submitting Medicare claims for payment based on patient referrals from physicians having a "financial relationship" with the entity.

The Stark Act also prohibits a healthcare entity from presenting or causing to be presented a Medicare claim for services furnished pursuant to a prohibited self-referral. The law includes various safe harbor provisions that permit certain self-referrals under specific conditions, including bona fide employment relationships.

Even in the context of a bona fide relationship, however, the compensation arrangement between the physician and the health care entity must "not [be] determined in a manner that takes into account (directly or indirectly) the volume or value of any referrals by the referring physician." 42 USC § 1395nn(e)(2)(B)(ii).

Attorneys for Whistleblower Actions under the Stark Act

The attorneys at Console Mattiacci Law, LLC fight cases involving the Stark Act throughout Pennsylvania, New Jersey and New York. We understand the best way to help whistleblowers in New Jersey and Pennsylvania who pursue these actions.

In some cases, the whistle-blower is entitled to up to 30 percent of the government's recovery in False Claims Act cases. The penalties authorized under the False Claims Act were raised in 2016 to a range of $10,781 to $21,563 per claim.

The Stark Act often comes up in cases with a claim for retaliation in employment law cases. Our employment law attorneys represent clients in whistleblower actions in Pennsylvania and New Jersey.

With offices in Philadelphia, PA, and Moorestown, NJ, our employment law attorneys represent clients in whistleblower claims involving both the Stark Law and the Anti-Kickback Act.

Both of these provisions prohibit a health care entity from submitting claims to Medicare based upon referrals from physicians who have a "financial relationship" with the health care entity, unless a statutory or regulatory exception or safe harbor applies. 42 U.S.C. §§ 1395nn(a)(1); 1320a-7b(b).

For any whistleblower action involving medicare or medicaid, contact us to discuss the case. Call 215-545-7676 today.


Preventing Medicare Abuse through Self-Dealing

To prevent Medicare abuse through self-dealing, the Stark Law prohibits a physician from referring patients to a hospital or other healthcare facility in which he has a financial interest.

Stark Law includes an exception for a physician-owned hospital, as long as the hospital complies with various reporting requirements. The Affordable Care Act amended the Stark Law to limit the ability of a physician-owned hospital to expand but carved out expansion exceptions for hospitals in medically underserved areas.

As amended, the Stark Law prohibits judicial review of the procedure used to grant or deny an application for an expansion exception.


The Hospital Ownership Exception

Title XVIII of the Social Security Act of 1935, 42 U.S.C. §§ 1395–1395lll, establishes Medicare, a medical insurance program for the elderly and disabled.

Section 1877 of the Act—commonly referred to by the surname of its sponsor, former U.S. Congressman Peter Stark—forbids “self-referrals” by which a physician could profit from Medicare reimbursements to healthcare providers with which he has a financial relationship. 42 U.S.C. § 1395nn(a)(1)–(2).

The “hospital ownership” exception accommodates physician-owned hospitals by allowing a physician to refer patients to a hospital in which he has an ownership interest, provided the hospital complies with reporting and disclosure requirements. 42 U.S.C. § 1395nn(d)(3)(D), (i)(1)(C)–(E), (i)(2).

Title VI of the Patient Protection and Affordable Care Act of 2010 (ACA) amends the Stark Law to prohibit physician-owned hospitals to expand beyond “the number of operating rooms, procedure rooms and beds for which the hospital is licensed ... on March 23, 2010.” Pub. L. No. 111-148 § 6001(a), 124 Stat. 119, 684–689, codified as amended at 42 U.S.C. § 1395nn(d)(2)–(3), (i).

The expansion restriction exempts some hospitals in medically underserved communities—“applicable hospitals” and “high Medicaid facilities”—subject to approval by the Secretary of the U.S. Department of Health and Human Services (HHS). See 42 U.S.C. § 1395nn(i)(3).

As amended by the ACA, section 1395nn(i)(3) reads, in relevant part:

(A) Process.

(i) ... The Secretary shall establish and implement a process under which a hospital ... may apply for an exception from the [nonexpansion] requirement ....

[ (ii) ] The process under clause (i) shall provide ... the community ... the opportunity to provide input with respect to the application.

(iii) ... The Secretary shall implement the process under clause (i) on February 1, 2012.

(iv) ... Not later than January 1, 2012, the Secretary shall promulgate regulations to carry out the process under clause (i).

(B) Frequency—The process described in subparagraph (A) shall permit an applicable hospital to apply for an exception up to once every 2 years.

(C) ... [A]n applicable hospital granted an exception under the process described in subparagraph (A) may [expand].

(D) ... Any [expansion] may only occur ... on the main campus of the applicable hospital.

(E) ... “[A]pplicable hospital” means a hospital—

(i) that is located in a county in which [population growth has exceeded the state average by at least 150 per cent for the past five years] ...;

(ii) [that has an] annual percent of total inpatient [Medicaid] admissions ... [that exceeds the county average];

(iii) that does not discriminate against beneficiaries of [Medicare or Medicaid nor] permit physicians practicing at the hospital to [do so]; (iv) that is located in a State in which the average bed capacity ... is less than the national average ...; and

(v) that has an average bed occupancy rate that is greater than the [state] average ....

[ (F)–(H) define terms not relevant here and require publication of expansion decisions.]

(I) Limitation on review—There shall be no administrative or judicial review under section 1395ff of this title, section 1395oo of this title, or otherwise of the process under this paragraph (including the establishment of such process).

42 U.S.C. § 1395nn(i)(3) (emphasis added).


The ACA Amended the Stark Law to Incorporate the Expansion Prohibition

The ACA amended the Stark Law to incorporate the expansion prohibition, the applicable-hospital exception and the preclusion-of-review provision.1 Pub. L. No. 111-148, § 6001(a), 124 Stat. 119, 688.

The preclusion provision forbids “administrative or judicial review under section 1869 [42 U.S.C. § 1395ff], section 1878 [42 U.S.C. § 1395oo], or otherwise of the process under this paragraph (including the establishment of such process).”

The legislative history of the statute entitled “America's Affordable Health Choices Act of 2009,” a precursor to the ACA that contained an arguably broader provision precluding review of “the exception process under this paragraph, including the establishment of such process, and any determination made under such process.” H.R. 3200, 111th Cong. § 1156(a)(5) (as reported Oct. 14, 2009).


Claims under the False Claim Act

The Stark Law prohibits a physician from making a referral, for services otherwise covered under Medicare, to an entity with which he has a financial relationship. 42 U.S.C. § 1395nn(a)(1).

The Stark Law also prohibits the payment of any Medicare claim for services provided in violation of this provision. Id. § 1395nn(g)(1). The Anti-Kickback Statute makes it a felony to offer or pay any remuneration to induce a person to refer an individual for the furnishing of any service for which payment may be made under a federal health care program. 42 U.S.C. § 1320a-7b(b)(2)(A).

Violation of the Stark Law or the Anti-Kickback Statute can support a claim under the False Claims Act. (Doc 125 at 7). In McNutt ex rel. United States v. Haleyville Medical Supplies, Inc., 423 F.3d 1256, 1257, 1259 (11th Cir. 2005), the court found that a violation of the Anti-Kickback Statute can form the basis for a False Claims Act claim.

Likewise, in United States ex rel. Kosenske v. Carlisle HMA, Inc., 554 F.3d 88, 94 (3rd Cir. 2009), the court concluded that “[f]alsely certifying compliance with the Stark or Anti-Kickback Acts in connection with a claim submitted to a federally funded insurance program is actionable under the FCA.”


Purpose of the Stark Law

Title XVIII of the Social Security Act of 1935, 42 U.S.C. §§ 1395–1395lll, establishes Medicare, a medical insurance program for the elderly and disabled. Section 1877 of the Act—commonly referred to by the surname of its sponsor, former U.S. Congressman Peter Stark—forbids “self-referrals” by which a physician could profit from Medicare reimbursements to healthcare providers with which he has a financial relationship. 42 U.S.C. § 1395nn(a)(1)–(2).

The “hospital ownership” exception accommodates physician-owned hospitals by allowing a physician to refer patients to a hospital in which he has an ownership interest, provided the hospital complies with reporting and disclosure requirements. 42 U.S.C. § 1395nn(d)(3)(D), (i)(1)(C)–(E), (i)(2).

Title VI of the Patient Protection and Affordable Care Act of 2010 (ACA) amends the Stark Law to prohibit physician-owned hospitals to expand beyond “the number of operating rooms, procedure rooms and beds for which the hospital is licensed ... on March 23, 2010.” Pub. L. No. 111-148 § 6001(a), 124 Stat. 119, 684–689, codified as amended at 42 U.S.C. § 1395nn(d)(2)–(3), (i).

The expansion restriction exempts some hospitals in medically underserved communities—“applicable hospitals” and “high Medicaid facilities”—subject to approval by the Secretary of the U.S. Department of Health and Human Services (HHS). See 42 U.S.C. § 1395nn(i)(3).


False Claims under Stark Law and the Anti-Kickback Act

When the allegedly false claims are based on violations of the Stark Law and the Anti-Kickback Act, the plaintiff must prove that:

42 U.S.C. § 1395nn(a)(1).

Once the plaintiff has established a prima facie violation of the Stark Law or the Anti-Kickback Act, the burden shifts to the defendants to demonstrate that the financial arrangement fits within a statutory exception or safe harbor.

For instance, in United States ex rel. Kosenske v. Carlisle HMA, Inc., 554 F.3d 88, 95 (3d Cir. 2009), the court found that “[o]nce the plaintiff or the government has established proof of each element of a violation under the [Stark] Act, the burden shifts to the defendant to establish that the conduct was protected by an exception.”.

In United States v. Rogan, 459 F.Supp.2d 692, 717 (N.D. Ill. 2006), the court noted that, once the plaintiff or government has established a violation of the Stark Act, the defendant bears the burden of establishing that the conduct was protected by an exception.

In United States ex rel. Baklid-Kunz v. Halifax Hosp. Med. Ctr., No. 09-1002, 2012 WL 921147, at *5 (M.D. Fla. Mar. 19, 2012), the court concluded that because Stark Act exceptions are "affirmative defense rather than elements of a cause of action ... it is the Defendants' obligation to plead that they apply rather than the [relator's] obligation to plead that they do not apply."


Additional Resources

Prohibitions on the Physician Self-Referral - Visit the website for the Centers for Medicare & Medicaid Services at www.cms.gov to learn more about prohibitions on the physician self-referral. Section 1877 of the Social Security Act (the Act) (42 U.S.C. 1395nn), also known as the physician self-referral law prohibits a physician from making referrals for certain designated health services (DHS) payable by Medicare to an entity with which he or she (or an immediate family member) has a financial relationship (ownership, investment, or compensation), unless an exception applies.

A Roadmap for New Physicians: Fraud & Abuse Laws - Visit the website for the Office of Inspector General with the U.S. Department of Health & Human Services to find a roadmap for new physicians. The article explains the five most important federal fraud and abuse laws that apply to physicians including the Civil Monetary Penalties Law (CMPL), the Exclusion Authorities, the Physician Self-Referral Law (Stark law), the Anti-Kickback Statute (AKS), and the False Claims Act (FCA).


This article was last updated on Monday, May 21, 2018.

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