Physician self-referral is prohibited under the Stark Laws, which prevent a physician from referring a Medicare or Medicaid patient to an entity that provides defined health services if the physician (or a member of their immediate family) has a financial relationship with that entity.
We spoke to Ileana Hernandez of Manatt Phelps & Phillips LLP about Stark Laws and how they apply to Healthcare Fraud.
How Stark Laws Apply to Healthcare Fraud
In the 1980s, Congress enacted laws that prevent physicians from making referrals for particular services when there is a financial relationship between the physician and the entity providing those services. The Stark laws are a set of federal statutes that prohibit physicians from making referrals for certain designated health services if they have a financial relationship with an entity that provides those services or with someone who does, such as other hospitals, laboratories, pharmacies, and others. In addition to Medicare, these laws also apply to Medicaid recipients and other federal and state healthcare programs.
The Stark laws, as they apply to the prosecution of healthcare fraud cases, essentially create five categories of prohibited remuneration:
1) Referral for designated health service in which the physician has a financial relationship;
2) Provision of designated health service in which the physician has a financial relationship;
3) Provision of items or services in which the physician has a financial relationship;
4) Referral for designated health service to an entity in which physician has a financial relationship; and
5) Provision of designated health service to an entity in which physician has a financial relationship.
According to Hernandez, while the Stark laws have been in existence for a while, healthcare fraud cases are just now getting into court. “Unfortunately, the statutes of limitations had expired on most of them because Medicare and Medicaid don’t find out about these violations until after ten years from when they occurred,” she said.
In addition to being subject to civil sanctions, Stark violations are also subject to criminal punishment. The False Claims Act can be used to prosecute Stark violations.
The False Claims Act is a law that imposes liability on persons who knowingly present, or causes to be presented, false claims for payment to the federal government. Under the False Claims Act, liability includes “claims” that result from a scheme to defraud or “claims” that are false or fraudulent.
According to Hernandez, the government views Stark laws as a fraud on the system because doctors have been getting away with it for so long, even though they know what they are doing is wrong. She explained that in many cases, the hospitals are put in a position of being liable for penalties because they have to sign affidavits saying they will comply with Stark Law requirements.
“If you are an employee at a hospital and see transactions involving your employer that involve two entities under Stark Law, you should speak up about it,” she said. “There is no private right of action under the Stark Laws, but there is liability for workers who try to hide activity they know is wrong.”
The False Claims Act imposes penalties in situations where someone can show that Medicare or Medicaid was not paid when it should have been. The government also has the ability to bring criminal actions against individuals or companies that are violating Stark Laws or any other fraud statutes.
“Recently, the government has had more resources to devote to healthcare fraud issues. The False Claims Act imposes heavy penalties on people who are found guilty of this type of fraud,” Hernandez said. “I think that prosecuting these cases is important because it sends a message that these acts will not go unpunished.”