What You Should Do When You Are Under Stark Law Investigation

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Knowledgeable Defense Attorneys Aggressively Serving Professionals Who are Under Investigation for Stark Law Violations in California

Under Section 1877 of the Social Security Act, commonly known as the Stark Law, physicians in California can face severe federal penalties for making or receiving improper referrals. If you are being investigated for improper referrals involving Medicare patient benefits, you will need to hire an experienced legal team to help you avoid substantial financial liability.

As a physician in California, you are subject to a complex set of laws, rules, and regulations that, in one way or another, govern virtually all aspects of your practice. With complicated requirements for everything from use of medical facilities to procedures for billing Medicare, it is easy to lose sight of other issues that may not always be top of mind.

One such issue is the business of referrals. Specifically, so-called “self-referrals” that are prohibited by the Stark Law. But, unfortunately, when it comes to prohibited self-referrals, this is one area of California healthcare law where lack of intent is not a defense to liability.

1. Understanding Physicians and Healthcare Entities Responsibilities Under the Stark Law

The Stark Law is a federal statute that was enacted in 1995 in order to combat what was, at the time, the growing problem of physician referrals that resulted in payments out of the coffers of Medicare. Since it was first enacted, the Stark Law’s scope has expanded significantly, and today federal investigators and prosecutors use the Stark Law to target physicians in California and other states often within the context of broader Medicare fraud investigations.

Prohibited Referrals Under the Stark Law

At a base level, the Stark Law contains two primary prohibitions:

  • The Stark Law prohibits physicians from making referrals for “designated health services” to any entity in which the physician or an immediate family member has a financial relationship where the designated health services would be paid for through Medicare.
  • The Stark Law prohibits entities that receive physician referrals from presenting (or causing to be presented) any Medicare reimbursement claims for designated health services referred by a physician covered under the statute.

As a result, physicians and entities on both sides of physician “self-referrals” can face liability under the Stark Act. Physicians can be charged for making improper referrals, and entities receiving improper referrals can be charged for billing Medicare in connection with the referred services.

Stark Law “Designated Health Services”

What qualifies as a “designated health service”? As federal law enforcement authorities have used the Stark Law to prosecute physicians and healthcare entities over the past two decades, the services falling within the scope of the Stark Law’s prohibitions has become increasingly broad. Currently, designated health services under the Stark Law include:

  • Clinical laboratory services
  • Durable medical equipment (DME) and supplies
  • Home health services
  • Hospital services (both inpatient and outpatient)
  • Occupational therapy services
  • Outpatient prescription drugs
  • Outpatient speech-language pathology services
  • Parenteral and enteral nutrients, equipment, and supplies
  • Physical therapy services
  • Prosthetics, orthotics, and prosthetic devices and supplies
  • Radiation therapy services and supplies
  • Radiology and certain other imaging services

“Strict Liability” Under the Stark Law

Critically, the Stark Law is unique from other Medicare fraud statutes in that it imposes what is known as “strict liability” for improper referrals. While lack of knowledge or intent is a defense to billing violations, submitting false claims, and engaging in other forms of Medicare fraud, it is not a defense to violations of the Stark Law. If you provided an improper referral or inappropriately billed Medicare for designated health services, you can face penalties regardless of whether you were aware of the impropriety involved.

Penalties for Stark Law Violations

This becomes all the more concerning for physicians and entities facing Stark Law investigations when you consider the penalties for improper practices involving physician self-referrals. These penalties include:

  • Denial of payment for Medicare billings related to improper referrals
  • Recoupment requests for improper Medicare billings
  • Penalties of $15,000 per improperly billed designated health service
  • Penalties of $100,000 for any arrangements that are deemed to be “circumvention schemes” under the Stark Law

2. Defense Strategies for Stark Law Investigations

Due to the strict liability nature of the Stark Law, defense strategies in Stark Law investigations often focus on identifying exceptions that can insulate physicians and healthcare entities from liability. While there are actually numerous exceptions under the Stark Law, knowing which exceptions apply and how to assert them effectively requires the help of an experienced healthcare fraud defense attorney.

The following is a non-exclusive list of exceptions under the Stark Law:

  • Bona Fide Employment The Stark Law does not apply in the context of a bona fide, compensation-based employment relationship. The employment must be for identifiable services, and the amount of compensation must be consistent with fair market value as established in an arm’s length transaction. The physician’s compensation cannot be based upon the value or volume of referrals and must be paid regardless of whether any referrals are made.
  • Personal Service Arrangement The Stark Law does not apply to personal service arrangements. A personal service arrangement is one that is set out in writing, covers specified services, and covers all services provided by the physician to the entity receiving referrals. The services must be reasonable and necessary, and the compensation paid must be consistent with a fair market value in an arm’s length transaction.
  • Physician Services within a Group Practice The Stark Law does not apply to physician services that are furnished personally by a physician to a member of the referring physician’s group practice, or that are furnished under the supervision of another physician who is a member of the referring physician’s group practice, provided that the supervision otherwise complies with Medicare requirements.
  • In-Office Ancillary Services The Stark Law does not apply to qualifying services and items of durable medical equipment (DME) that are furnished personally by the referring physician, a physician who is a member of the referring physician’s group practice, or an individual supervised in accordance with Medicare requirements.

In addition to asserting these and other exceptions, there are a number of other defenses (including Constitutional defenses) that physicians and healthcare entities may be able to assert as well. Once again, knowing what defenses are available and how to use them to avoid charges requires the involvement of attorneys who have specific and extensive experience in Stark Law investigations.

3. Protecting Yourself and Your Practice in a Federal Stark Law Investigation

If you are facing a Stark Law investigation in California, there are a number of steps you can begin to take immediately to aid in your defense. As the target of a federal investigation involving allegations of impermissible physician self-referrals, you should:

  • Assert Your Rights When you are being investigated by the Centers for Medicare and Medicaid Services (CMS), the Federal Bureau of Investigation (FBI), the Department of Justice (DOJ), the Office of Inspector General (OIG) or any other federal agency, you have rights. These include the right to legal representation, and the right not to say anything that could be used against you in court.
  • Hire an Experienced Defense Team to Intervene Early You want to engage legal representation now, before the investigation leads to federal charges. Fending off an investigation can be much easier (and must less-costly, both financially and professionally) than defending yourself in a federal case.
  • Learn What to Expect During the Investigation In Government Investigations Explained, our attorneys provide an overview of what you can expect during the course of a Stark Law investigation. Our website includes numerous other resources as well, and we encourage you to prepare a list of questions to ask our attorneys during your free initial case evaluation.

4. Choosing the Right Legal Representation for Your Stark Law Investigation

When your professional practice or business is at risk, your choice of legal representation matters. When it comes to defending against allegations under the Stark Law, it is critical to choose a law firm that is comprised exclusively of senior healthcare fraud defense attorneys and former federal prosecutors. You cannot afford to put your trust in inexperienced representation, and you need a legal team that can assess your Stark Law investigations from all angles.

Schedule a Free Case Evaluation at The Criminal Defense Firm

If you are under investigation by the federal government, you do not have time to waste. Call 866-603-4540 or submit our online case assessment form to discuss your Stark Law investigation with our defense team today.

Not all attorneys of The Criminal Defense Firm are licensed in California and nothing contained in here is meant to constitute the unauthorized practice of law.
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