Should the Stark Law be Repealed?

In an August 2, 2013 article on Modern Healthcare, former Congressman Fortney “Pete” Stark, the architect of the Physician-Self Referral Law (commonly called the Stark Law), indicated that he is in favor of repealing his namesake law.  Former Congressman Stark complained about the complexity added to the law, which he remembered as just being about stopping kickbacks or other monetary splitting in return for patient referrals by imposing a penalty of five years or a $50,000 fine.  The Congressman blamed “high-priced lawyers” for the introduction of convoluted loopholes and taking the law away from its original simplicity.

However, as pointed out in the article, Congressman Stark’s description of the Stark Law is actually more a description of the federal Anti-Kickback Statute, not the physician self-referral law that became known as the Stark Law.  As many in the healthcare field know, the Stark Law focuses upon financial relationships, both direct and indirect, between providers who may refer patients to each other for certain defined healthcare services.  Included in the law and its implementing regulations are numerous exceptions, each of which consist of a number of specific and convoluted elements that must be satisfied exactly to be compliant.  As such, the Stark Law, even on its face, is not as straightforward as the Congressman tries to describe it.

Notwithstanding the mischaracterization, Congressman Stark’s lament raises a valid question: should the Stark Law be repealed?  That is not an easy question to answer because the basic premise of the law is appealing.  Looking at the underlying purpose of the Stark Law is helpful in trying to answer the question though.  As indicated above, the Stark Law was designed to discourage referrals between providers when there is a possibility that the relationship between the providers influenced the referral decision.  The thinking went that providers should not base referral decisions on their potential financial gain.  Theoretically, it is a good goal.

The problem in practice is how the Stark Law is applied.  The law is a strict liability law, which means any violation, whether inadvertent (technical) or intentional, is punished exactly the same way.  A violation will result in all Medicare funds needing to be returned that were obtained as a result of the tainted relationship.  The harsh penalties and treatment of all violations the same way are a couple of the primary issues with the law.  Oftentimes parties do not intend to violate the Stark Law, but end up with a non-compliant relationship because of some small oversight.  Arguably, these inadvertent, or technical, violations should not carry the same consequences as violations resulting from intentional avoidance of the law.

Repeal may not be the correct answer so much as reform and simplification.  A favorite way to describe business in healthcare is to say: this is a normal business proposal in any other industry and would be ok, but because the proposal is in healthcare, shift your thinking 180 degrees.  This reality is confounding to many people when they are confronted with a Stark Law issue and is hard to come to grips with.  Why should the healthcare industry be treated so differently from other industries, when it does not seem to have any higher concentration of bad actors than others.

Until there is a time when the Stark Law is changed, participants in the healthcare field must look at all financial relationships carefully.  It is a minefield that cannot be avoided.

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About Matt Fisher

Matt is the chair of Mirick O'Connell's Health Law Group and a partner in the firm's Business Group. Matt focuses his practice on health law and all areas of corporate transactions. Matt's health law practice includes advising clients with regulatory, fraud, abuse, and compliance issues. With regard to regulatory matters, Matt advises clients to ensure that contracts, agreements and other business arrangements meet both federal and state statutory and regulatory requirements. Matt's regulatory advice focuses on complying with requirements of the Stark Law, Anti-Kickback Statute, fraud and abuse regulations, licensing requirements and HIPAA. Matt also advises clients on compliance policies to develop appropriate monitoring and oversight of operations.
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