There is a practice called Physician self-referral. This is when a physician refers a patient to a medical facility, which he has part ownership, financial interests or investment in. It is thought to be a conflict of interest that a physician will stand to benefit from referring patients to his medical facility for health services. This self-referral practice has a potential to be abused because the physician may over-refer patients for services that may or may not be necessary. That is why; the law was developed to prevent such self-referral practices.
The Stark Law was passed by the federal government to prevent physician self referral and does not allow a physician to refer Medicare or Medicaid patients to facilities that are owned by the physician or a member of the physician's immediate family, unless it is under exception.
Financial relationship is the direct or indirect investment or financial interest in the company or facility that specifically provides designated health services. Compensation arrangements also fall under this category. Therefore a physician cannot refer Medicare or Medicaid patients to a facility that he has financial interests in, otherwise payment can be withheld and not paid.
In the beginning, the law only pertained to physician referrals for clinic lab services. But as the law expanded, when the second version was developed, the Stark law became applicable to a long list of designated health services, which include physical therapy, occupational therapy, radiology, orthotics, outpatient prescription drugs and many more.
The Stark law only involves a referral for various services that is why the definition of referral must be clearly stated for all to understand. Referral is a physician's request for, certifying or recertifying a need, or ordering any designated health service, that is reimbursable by Medicare. This also includes a request for consultation with another physician or any test, procedure or treatment ordered by that other physician. Referral doesn't include services that are personally performed by the referring physician.
There are a few exceptions to the Stark law that fall under, physician services exception, services furnished by an organization of enrollees exception, reserved, academic medical centers exception, implants furnished in an ambulatory surgical center, in-office ancillary services exemption, intra-family rural referrals, eyeglasses and contact lenses following cataract surgery, and Erythropoietin and other dialysis-related drugs exception.
The penalties for violation of the Stark law are severe and include denial of refund, denial of payment, exclusion from the Medicare or Medicaid programs, monetary penalties in a civil court, which can include fines of $15,000 per service violation and $100,000 for each arrangement found to be a scheme for the purpose of ensuring physician referrals.
With the Stark Law in place, health care practitioners must be aware of how it affects them in their billing and treatment of patients covered by Medicare and Medicaid. It is always best, to know and be aware of the Stark law and how it affects your practice.