Getting caught up in a kickback scheme can be scary. Let’s break down what kickbacks and Stark Law violations are all about, so you can protect yourself.
What are Kickbacks?
A kickback is when someone receives money or compensation for referring patients or business to another person or company. For example, if a doctor refers patients to a certain hospital and then gets paid by the hospital for those referrals, that’s a kickback.
Kickbacks are illegal in healthcare under the Anti-Kickback Statute. This law makes it a crime to knowingly and willfully pay or receive compensation to induce or reward referrals for federal healthcare programs like Medicare and Medicaid. Violating the Anti-Kickback Statute can lead to fines, jail time, and exclusion from federal healthcare programs.
Why are Kickbacks Illegal?
The main reason kickbacks are illegal is to protect patients. Kickbacks can influence healthcare decisions in unethical ways. A doctor might refer patients to a lower quality facility just because they get paid for the referral. Or they may order unnecessary tests and procedures to get more kickbacks. This drives up healthcare costs and puts patients at risk.
Kickbacks also undermine fair competition. Providers and suppliers should earn business based on quality, not bribes. Outlawing kickbacks helps prevent corruption in healthcare.
What is the Stark Law?
The Stark Law, also called the Physician Self-Referral Law, prohibits doctors from referring Medicare patients to healthcare facilities they or their family members have a financial interest in. This includes things like owning stock, having an ownership stake, loans, or compensation arrangements.
For example, Dr. Stark can’t refer his Medicare patients to Stark Surgical Center if he owns part of that business. The Stark Law only applies to referrals for certain designated health services, like clinical laboratory tests, radiology services, and inpatient/outpatient hospital services.
Why is Self-Referral Prohibited?
Like with kickbacks, the Stark Law aims to avoid conflicts of interest that could harm patients. A doctor who refers patients to a facility he owns stands to profit personally from that referral. This incentive could influence him to make referrals based on money rather than medical necessity.
The Stark Law removes this temptation by saying doctors can’t benefit financially from their own referrals. This protects patients against overutilization of services just to generate revenue. It also promotes fair market competition among healthcare providers.
Exceptions to the Stark Law
There are a few exceptions where physicians are allowed to refer patients to entities they have a financial relationship with:
- Publicly traded securities – Doctors can own investment securities that are publicly traded.
- Rural providers – Special rules apply for providers in rural areas.
- Academic medical centers – Special rules also apply for academic medical centers.
- In-office ancillary services – Doctors can refer patients to services that are provided “under the same roof” within their own group practice, like an in-house lab or radiology center.
- Other statutory and regulatory exceptions – There are also some other narrow exceptions defined in the law and regulations.
But these exceptions only apply if all requirements of the law are met. Having an ownership interest does NOT automatically make referrals legal.
Penalties for Violating Stark Law
Violating the Stark Law can lead to:
- Repayment of all Medicare claims related to the prohibited referral
- Fines up to $15,000 per service
- Exclusion from federal healthcare programs
- Potential false claims charges
So violations can get very expensive! Even unintentional violations can trigger penalties. This is because Stark Law is a “strict liability” law – intent to violate the law does not matter.
How to Avoid Kickbacks & Stark Violations
The laws around kickbacks and self-referral can get complicated, but here are some tips to steer clear of violations:
- Never pay or receive compensation that is tied to referrals – Avoid per-click fees, percentage-based payments, etc. Stick to fair market value compensation.
- Be transparent about financial relationships – Disclose ownership interests as required and avoid hidden side deals.
- Review Stark Law exceptions and advisory opinions – Work closely with legal counsel to structure arrangements that fit squarely within exceptions.
- Audit referrals regularly – Check that referrals don’t correlate with compensation or ownership interests.
- Train staff on legal requirements – Educate all employees and business partners on the Anti-Kickback Statute and Stark Law.
- Seek expert advice – Consult regularly with attorneys to review arrangements and address concerns proactively. An ounce of prevention is worth a pound of cure!
Violating these laws can have serious consequences. If you suspect potential kickbacks or self-referral violations, seek legal counsel immediately to avoid liability. With the right compliance program, you can successfully navigate healthcare’s referral laws.