When the Federal Stark Act Kicks In

It’s interesting to note how the Stark Act and the federal Anti-Kickback law apply to doctors and hospitals, especially since each statute carries a criminal penalty and a violation could result in a prison sentence.

When it comes to the federal Stark Act, this particular piece of legislation relates to just doctors and only kick-backs that they or a member of their family get from referring Medicare and Medicaid patients to labs in which the doctor has a financial interest. The section where this is covered is 42 USC 1395nn. Of note is the fact that the Stark Act was later amended to also ban doctor’s referring to ‘other’ health care facilities where the doctor may have a financial interest, and that appears in section 42 USC 1395nn (b)(1).

The most important thing to remember about this Act is that it happens to be a strict liability statute. So under those circumstances, any company (meaning a doctor in business) that deals with Medicare or Medicaid has to have a tough compliance training program. That program may include staff of the clinic or even family members who need to know what they are not allowed to do under this Act.

Many of the violations under the Anti-Kickback Statute happen simply because the business (the doctor) and his workers don’t completely understand the law related to this area. It’s vital that they do get this kind of knowledge and then follow it to the letter if they expect to stay out of legal hot water. One other thing to note is that the Stark Act is not relevant to medical equipment providers, marketing services, knowledge centers or other entities. As with many things relating to the law however, there are exceptions when it comes to entities.

For instance, an entity just may be found liable under the federal Anti-Kickback Statute for a variety of acts. In essence, this statute was created to right the inappropriate awarding of subcontracts, but more than that it took aim at the dishonesty of agents, workers or officers who (in some fashion) took part in the awarding of subcontracts that involved government funding.

In other words, the Anti-Kickback Statute has a broader application to relationships involving financial transactions with any entity that may refer patients to the ‘other’ party to the financial relationship. One source of confusion when it comes to the Anti-Kickback Statute is that it uses the terms referring and recommending, but there is no definition of the term referring in the statute. Under this statute there needs to be proof provided that there was an unlawful intent versus the Stark Act which is strict liability.

Let’s take an example of a doctor who willfully and knowingly asks for or gets any payback in return for sending a person to someone else so they can supply them with an item or a service for which “payment may be made in whole or in part under a federal health care program.” Under the Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b)(1)(A.), these actions are illegal – period. It’s pretty clear and straightforward and knowing information like this is critical to the operation of an ethical business (doctor’s office).

The bottom line is that if you don’t understand how the Stark Act or the Anti-Kickback Statute applies to your medical business or operation, it’s a wise idea to speak to an attorney who has an extensive track record in counseling compliance for these kinds of issues. It’s better to be safe than sorry later when the government comes knocking at your door asking questions.

Miller Leonard is a Denver federal criminal defense lawyer and Denver state criminal defense attorney. To learn more, visit Fedcrimdef.com or call 303.623.2721.

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