The government may be poised to cut one of its biggest tripwires for unsuspecting healthcare providers: The Stark Law.

Essentially an antikickback law, Stark generally prohibits a physician from referring Medicare or Medicaid patients to an entity in which the physician or their immediate family member has a financial relationship (such as an ownership or investment interest or compensation arrangement). The entity, likewise, may not bill the government for such a referral (Code 42 U.S.C.). And Stark applies to a wide variety of health services, including home healthcare services, physical and occupational therapy, durable medical equipment, and speech pathology services.

Stark is widely misunderstood (or unknown entirely), particularly among small providers who may not have the resources to carefully monitor this additional compliance risk. But penalties for violations can be severe, reaching into the tens or hundreds of millions of dollars. In United States Drakeford v. Tuomey, for instance, the offending healthcare system was assessed $237 million for Stark violations.

Any illegal referral under Stark can result in sanctions, ranging from a denial of payment and requirement of refund for payments made to civil penalties for improper claims of up to $15,000 per service and circumvention schemes up to $100,000 per arrangement (Code 42 U.S.C.). The Secretary of Health and Human Services can issue regulations to define acts that can lead to sanctions.

Private citizens often bring False Claims Act suits along with assertions of Stark and antikickback statute violations. For example, in U.S. v. HPC Healthcare, Inc., the complaint alleged that hospice services providers and home healthcare referral services committed federal healthcare fraud by providing hospice care to ineligible patients and not creating adequate documentation. Regarding Stark, the complaint alleged an impermissible financial relationship between the referrers and hospice providers based on conferring benefits in exchange for referrals. The claim was dismissed because it lacked the specificity required under the False Claims Act, but it is an example of the types of actions that can give rise to Stark violations.

Stark is controversial in part because of the heavy burden placed on smaller healthcare facilities due to reporting requirements, especially where referral options are few. And the government appears to be considering significant changes to it.

In June 2018, the Centers for Medicare and Medicaid Services asked for public comment on existing burdens under Stark, receiving numerous complaints about the burdens it imposes. Then, in a July 2018 hearing before the House Ways and Means Committee, Health and Human Services Deputy Secretary Eric Hargan continued to recognize in discussing Stark that "inappropriate motives could distort decision-making in health care" (Modernizing Stark Law to Ensure the Successful Transition from Volume to Value in the Medicare Program [Statement of Eric D. Hargan]). Patients, in other words, should not be referred to higher price, lower quality, or unnecessary services due to a physician's self-interest. But Hargan noted that Stark, which was based on outmoded fee-for-service payments and not modern value-based payments, might be outdated and in need of serious reform.

Congress, likewise, has recently cast a skeptical eye toward Stark. The Medicare Care Coordination Improvement Act of 2017 remains pending before the House Energy and Commerce and Ways and Means Committee. If enacted, it would eliminate many provisions of Stark. This would, in turn, significantly impact care delivery and provider ownership options.

For now, though, Stark remains the law of the land, and providers are advised to understand and follow it.