June 14, 2022

Physicians and other health care providers can face significant financial and reputational consequences for alleged violations of the federal Stark Law and Anti-Kickback Statute, and, with respect to the latter, a physician may face up to ten years in prison and felony conviction. Both the Stark Law and the Anti-Kickback Statute apply to physicians and others who submit claims for reimbursement to federal health care programs including Medicare and Medicaid for the provision of medical services and items. Specifically, the purpose of both the Stark Law and the Anti-Kickback Statute is to prevent referrals for services and medical items reimbursed by the federal government for which the individual providing the referral receives a financial benefit, either directly or indirectly. 

Unfortunately, many physicians and other health care providers may not be aware of the civil and criminal liability they face when making referrals for services or receiving referrals from others, and even an unintentional violation of such laws – which may even seem like standard operating procedure or local custom for those involved – can result in jail time, a criminal record, steep financial penalties, an inability to participate in Medicare and Medicaid programs, and possible disciplinary action by professional oversight boards. 

The Anti-Kickback Statute Explained

The Anti-Kickback Statute – or AKS – is a federal criminal law found at 42 U.S.C. § 1320a-7b(b), which prohibits the knowing and willful payment or receipt of any “remuneration” (including any kickback, bribe, or rebate) in return for either:

  • Referring an individual to a person for any item or service for which payment may be made in whole or in part under a federal health care program, or
  • Purchasing, leasing, ordering, or arranging for any good, facility, service, or item for which payment may be made in whole or in part under a federal health care program (or simply for recommending the purchase, leasing, or ordering of any such good, facility, service or item)

Thus, at its simplest level, the Anti-Kickback statute makes it a crime to have any paid referral arrangement (whether in cash, property, or in-kind arrangement) for any health care services or goods for which payment is made under federal health care programs such as Medicare or Medicaid, subject to certain exceptions.

While it may be customary in other industries to have such referral arrangements, doing so in the health care industry can expose individuals and organizations to criminal charges and penalties which can include fines, jail terms, and exclusion from participation in federal health care programs. The Anti-Kickback Statute targets both those who make payments for referrals and those who receive them, and violation of the statute is a felony. An individual found guilty of violating the Anti-Kickback Statute faces up to ten years in prison and a $100,000 fine, in addition to being excluded from federal health care programs. 

There are a number of “safe harbor” provisions pursuant to the Anti-Kickback Statute which protect from prosecution those individuals and entities that have referral systems that operate within federal guidelines. Those that receive payment from federal health care programs are strongly encouraged to work with compliance counsel to ensure that any referral programs and practices are squarely within these safe harbors. 

The Stark Law Explained

The “Stark Law” is a common title for the federal Physician Self-Referral Law found at 42 U.S.C. § 1395nn. Similar to the Anti-Kickback Statute, the Stark Law prohibits certain types of referrals for health services for which payments are submitted for reimbursement under federal health care programs including Medicaid and Medicare. 

In brief, the federal Stark Law prohibits a physician from making referrals for designated health services to entities in which that physician or an immediate family member of the physician has a financial interest. A financial interest in another entity can include either an ownership or investment interest of the referring physician (or family member) in the entity, or a compensation arrangement between the referring physician (or family member) in the entity. A compensation arrangement is any financial arrangement involving remuneration – whether overtly or covertly, directly or indirectly, or in cash or in kind. 

Designated health services for which referral thereto might trigger an investigation or enforcement action pursuant to the Stark Law include:

  • Clinical laboratory services
  • Physical therapy services
  • Occupational therapy services
  • Radiology services (including magnetic resonance imaging, computerized axial tomography scans, and ultrasound devices
  • Radiation therapy services and supplies
  • Durable medical equipment and supplies
  • Parenteral and enteral nutrients, equipment, and supplies
  • Prosthetics, orthotics, and prosthetic devices and supplies
  • Home health services
  • Outpatient prescription drugs
  • Inpatient and outpatient hospital services
  • Outpatient speech-language pathology services

Physicians found to violate the Stark Law can face exclusion from participating in Medicare and Medicaid, denial of payment, and civil penalties of up to $15,000 per submitted claim and $100,000 for the existence of each arrangement or scheme. 

As with the Anti-Kickback Statute, there are numerous exceptions to the Stark Law for certain arrangements and payments such as for physician recruitment, certain personal service arrangements that meet specified requirements (including being set out in writing, having a term of at least one year, and involving fair market value compensation), and certain group practice arrangements. Again, physicians and health care providers are strongly advised to work with experienced health care compliance counsel to ensure any referral arrangements comply with federal law.  

Examples of Unlawful Kickbacks & Financial Arrangements

Examples of practices and arrangements that may trigger an investigation or enforcement action by federal regulators and/or prosecutors related to the Stark Law and/or Anti-Kickback Statute include the following:

  • A radiology lab paying a percentage of revenues for tests and other work done to a physician who refers patients to the lab
  • A physician referring patients to a physical therapy provider partially owned by the physician’s husband
  • A clinic entering into a financial contract with a dentist that requires the clinic to refer new patients to the dentist in exchange for the dentist providing the clinic free rental space in his building
  • A pharmacy owner advancing funds to a doctor to help him open his up medical practice in exchange for a promise on the part of the doctor to refer patients to the pharmacy
  • A medical center paying employees at a homeless shelter to refer and transport residents to the medical center
  • A hospital paying bonuses to a specialist to perform procedures at that specific hospital
  • A hospital providing special access to hospital facilities to surgeons who exclusively refer patients to that specific hospital
  • A pharmaceutical company providing free meals, travel expenses, or event tickets to doctors who consistently write prescriptions for the company’s medications
  • A medical supply company paying above-market “speaking fees” to doctors who consistently write prescriptions for the company’s products

Contacting Zweiback, Fiset & Zalduendo

Healthcare providers and professionals face unique and complex legal risks, and our attorneys have the legal experience and industry knowledge to counsel and protect clients in all aspects of the industry. It is important to respond properly to legal risks as soon as they arise.  Our attorneys are here to provide counsel and representation to mitigate risk at the earliest possible moment. 

 If you have reason to believe that you or your business may face a potential investigation, criminal charge, and/or enforcement action related to an alleged violation of the Stark Law or the Anti-Kickback Statute – or if you or your business are seeking to implement and/or improve compliance procedures to avoid the potential of a Stark Law or Anti-kickback Statute enforcement action – contact our office to speak with an experienced healthcare defense attorney regarding your situation today. 

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