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Healthcare: Stark Compliance

The Stark Law was originally enacted in 1990 and although it has been modified, it is a United States federal law (set of statutes) that prohibits a Physician from referring a Medicare, Medicaid, or any federal health program patient to a facility or entity that the Physician (or an immediate family member) has a financial interest in.

Basically, this set of statutes prevents physician self-referral.

The concern was that Physicians could refer a patient to a medical facility in which the physician has a financial interest, whether it be ownership, investment or a special compensation arrangement.  This would create a conflict of interest since the physician benefits from their own referral.  Such arrangements could encourage overutilization of services, driving up health care costs and actually create a referral system that limits competition by other providers.  The law addresses those concerns and prevents physicians from self-referring certain patients.

Contracts between physicians and hospitals must have specific things contained in the contract in order to fully follow this law.  Having your attorney review your contract before signing will ensure it has the items necessary to follow this law.  Even an unintended technical violation can result in a settlement. 

Although some physicians may rely upon the hospital or employer to watch out for issues in this area, each Physician should have an attorney review any contract with a medical facility or employer before they sign it. In addition to the main purpose of the law, there are seven “safe harbors” the contract should contain in order for the Stark Law to be fully complied with and your attorney will be sure those elements are there.