Legal Health; Stark Law

Stark Law

Stark law is a set of federal statutes in the United States that prohibit physician self-referral. The law specifically prohibits referral of by a doctor of a Medicaid or Medicare client to a health facility offering designated health service (DHS) given the physician or an immediate family member has any form of financial attachment to that facility. The prohibition is, of course, is upheld unless the relationship is classified under one of the many enumerated exceptions to the ban (Rosin, 2017). In 1988 the Ethics in Patient Referral Act bill was tabled by Stark. Some of the ideologies in the bill were signed into law as part of the Omnibus Budget Act of 1990. It was codified in the United States Code, Title 42, and Section 1395nn (42 U.S.C. 1395nn, “Limitation on certain physician referrals”).

The Omnibus Budget Reconciliation Act of 1993 contained what is known as the Stark II. The Stark II was amendments that were made on the Stark I law.  The official title of the Law was Ethics in Patient Referral Act.

Management’s Financial Responsibilities

The healthcare organizations that are affected by the Stark Law are expected to live up to some responsibilities stipulated in the Law. To begin with, the health care organizations are obligated to forward information to the relevant regulatory bodies such as Center for Medicare and Medicaid services (CMS) or Office of the Inspector General (OIG) when called upon to do that (“STARK LAW – INFORMATION, REGULATIONS, LEGAL SOLUTIONS”, 2017). The information required may be the name of a physician, the identification numbers of all the doctors or family members who have business relations or have compensation arrangements with the healthcare organizations. The healthcare team is further expected by the Stark Law to provide information on the nature of the business agreement and all necessary documentation.

Secondly, the Stark Law expects the healthcare organizations to act as whistleblowers when necessary. Whenever the health care entities offering DHS detect a physician is not complying with the Law they healthcare organizations are expected to alarm the appropriate authorities of this violation. In doing this, the healthcare organizations are ensuring a level playing field in which no one is above the Law and therefore has no undue advantage (Kolber, 2012). In addition to that, the healthcare organizations’ primary responsibility is to uphold the Law. Every healthcare organization has an obligation to comply with the requirements of the Stark Law.

The Center for Medicare and Medicaid Services being one of the healthcare organizations has a responsibility to interpret the Stark Law and offer advice and opinion on matters relevant to the Law’s statutes. The CMS is expected to give information and opinions to explain the Stark Law whenever called upon to do so. The CMS is required to provide advisory opinions in written form that discuss whether a doctor’s referral of a patient relating to a given DHS or other clinical laboratory services is barred within the Stark Law (Rosin, 2017).

Consequences for Ethical or Legal Breach

Violation of the Stark Law happens when a referring doctor who has a barred direct or indirect relationship with a DHS entity refers a patient covered by Medicaid or Medicare to the same DHS entity or when the DHS entity submits claims for compensation for the DHS. The Stark Law gives provisions for two types of sanctions that could be imposed when it is established that either party has acted in violation of the Law. Refund or nonpayment of claims imposed on the DHS entity. The civil money penalties for knowing the violations could also be imposed on both the referring doctor and the DHS entity (Rosin, 2017). To be more specific violations of Stark Law can result in some consequences. First, the DHS entity could be denied Medicaid or Medicare payment for the DHS service that was referred to them by the physician. The DHS entity could also be required to refund all the amounts collected the indicated DHS service; the refund should be done within a period of 60 days.

The Stark Law could also impose a civil money penalty (CMP) on any DHS entity or referring doctor for every claim or bill that the DHS entity or the referring doctor is aware or should be aware is meant for designated services for which payment may not be made. OIG can impose up to 15,000 USD per wrongful find or for each missed refund. Moreover, the law can enforce p to 100,000 USD on any DHS entity or referring physician for any scheme or arrangement that the either of them knows or should know has the principal purpose of assuring referrals that if made directly would be in violation of the Stark Law (Kolber, 2012). Finally, the provider would be hit with a five-year long exclusion from Medicaid or Medicare programs if they submit a claim or bill that they know or should be aware is not proper.

There are examples in the United States of violators of the Stark Law; to kick things off is the case regarding Tuomey Hospital in Sumter, S.C. The hospital paid $49.4 million for violating the Stark Act.  A federal jury ruled that the Tuomey Hospital acted in violation of the Stark Act in the employment contracts that it held with doctors at its outpatient surgery unit. The hospital appealed the ruling that its actions were in line with CMS guidance on complying with the Stark Law. Another scenario that involved violations of the Stark Law included Marion General Hospital that paid $1.2 million (Ellison, 2017). The violations were brought forward from within the hospital itself to the U.S. Attorney General’s office in October. The allegations included some financial relationships between the hospital and doctors that were never documented.

To sum it up, the former owners of the L.A. based City of Angels medical center that paid $ 10 million for paying illegal kickbacks. Rudra Sabaratnam and Robert Bourseau pleaded guilty to their role in an arrangement to pay patient recruiters illegal payments for the recruitment of sick patients. The patients underwent many medical treatments most of which were not medically necessary and were claimed from the federal health care programs (Ellison, 2017).

In conclusion, it is important to note that the Stark Law is a federal law in the U.S. that serves to ensure ethical referral of patients. The Law is codified in the United States Code, Title 42, and Section 1395nn (42 U.S.C. 1395nn, “Limitation on certain physician referrals”). The law has some consequences that the DHS entity or a referring physician could face if they violate the Law. These range from fines to serving lengthy bans from medical cover by Medicare and Medicaid. The paper has highlighted some examples of violators who suffered a similar fate.




Ellison, A. (2017). 10 largest False Claims, Stark Law and Anti-Kickback settlements of Retrieved 30 January 2017, from

Kolber, M. (2012). Stark Regulation: A Historical and Current Review of the Self-Referral Laws. HEC Forum18(1), 61-84.

Rosin, T. (2017). The Stark Act: 30 things to Retrieved 30 January 2017, from

STARK LAW – INFORMATION, REGULATIONS, LEGAL SOLUTIONS. (2017). Retrieved 30 January 2017, from