The Federal Government has long been concerned about the potential for financial incentives for health care providers in ordering and managing patient referrals when the bill is being paid by federal health care programs. As early as 1972, just seven years after the original Medicare program was signed into law by President Lyndon Johnson, Congress passed the first iteration of the Anti Kickback Statute as part of the other amendments to the Social Security Act that year. It later updated the law and made it a stand-alone statute in 1977.
Table of contents
In the next decade, as millions of people enrolled in the Medicare and Medicaid programs, certain abuses were revealed. Analysis of Medicare claims revealed a pattern among physicians with financial ties to clinical laboratories. Those with ownership interests or other financial relationships tended to order significantly more laboratory tests than physicians without such interests. In 1989, this led to the enactment of the Physician Self-referral Law, commonly referred to as the Stark Law, and its implementing regulations. The law is named for its most vociferous proponent, Representative Fortney (Pete) Stark of California. The Stark Law prohibits physicians from obtaining financial interests in certain healthcare entities, to prevent undue influence on their medical decision-making.
So after fifty-two years of anti-kickback laws and regulations and thirty-five years of Stark Law and regulations, what’s the difference between Anti-kickback and Stark laws?
First, a short review of the most important provisions of each of the laws.
The Federal Anti-Kickback Statute Terms and Applicability
The Anti Kickback Statute (AKS) applies to whoever knowingly and willfully offers and pays any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind, to any person to induce such person:
Federal Anti-kickback Statute Penalties
Criminals – and those who offer, pay, solicit, or receive kickbacks are guilty of a federal crime – are very inventive when it comes to making knowing and willful payments to health care providers in exchange for their Medicare or Medicaid patient referrals. Kickbacks have taken the form of gifts, under-market rent, subsidies for office operations, or payments above fair market value for services. Criminal penalties include fines of up to $25,000 per event and imprisonment for up to five years.
The Office of Inspector General (OIG) of the Health and Human Services Department can also impose penalties under the Civil Monetary Penalties Law for anti-kickback statute violations. Civil penalties are up to $50,000 per violation plus three times the amount of the illegal remuneration. Violators may also be excluded from Federal health care programs.
Federal laws include new and improved criminal penalties for those who illegally buy, sell, and distribute Medicare or Medicaid patient numbers and other health information identifiers. Civil fines for corporations that engage in such conduct can range up to $1 million!
Federal Anti-kickback Statute Safe Harbors
As the potential complexity of relationships by and between health care providers, pharmacy benefit managers, and health plans has increased over the past few decades, the “safe harbors” – exceptions to the regulations, have also increased in complexity.
Some examples of exceptions that fall within safe harbor rules are:
Also, a managed care organization that offers discounts to enrollees for the care or items provided to and for them, and follows all the guidelines specified in the safe harbor rules, would not violate anti-kickback laws. Any healthcare providers entering into a business involving an arrangement with another type of provider or insurance entity, or thinking about offering discounts to patients, should review the exceptions to the definition of compensation before initiating the arrangement.
Stark Law Terms and Applicability
The Stark Law applies to (and forbids) financial relationships between certain Designated Health Services (DHS) and physicians (or immediate family members) who refer patients to the health service that results in claims to federal healthcare programs like Medicare or Medicaid. Financial arrangements include investment arrangements and compensation arrangements between a physician and a DHS. The Stark Law and the Stark Regulations contain exceptions that permit financial relationships under some very specific conditions.
The Stark Law is a strict liability statute. This means that even if the specific intent of the financial relationship is not to induce patient referrals, the relationship may constitute a violation unless it meets an exception.
There are ten DHS medical services. Among the most important ones are:
Stark Law Penalties
Penalties for a Stark Law violation come from two main sources. First are penalties related to the value of the claims paid by the government based on referrals from physicians who received an improper payment or who had defective financial relationships. This penalty requires repayment by the DHS of the amounts paid for services provided pursuant to the referral.
The second type of penalties are civil monetary penalties of up to $15,000 related to each Stark law violation. Financial relationships may not have been intended to induce patient referrals, but that doesn’t matter under the strict liability definition applicable to the Stark Law. There is also the possibility of a penalty of up to $100,000 for every wilful violation of the Stark Law.
Finally, healthcare providers, including physicians, can be barred from future participation in Medicare or Medicaid programs.
Stark Law Exceptions
In the same way that there have been more provisions added to the Anti Kickback Statute and regulations, there have also been numerous additions to the Stark Law and regulations over the years. Some of the more common exceptions include:
- Personal Service contracts that govern financial arrangements with physicians referring patients to a Designated Health Service.
- Physicians who are Bona fide employees are covered under another Stark safe harbor exception.
There are numerous other safe harbors to the Stark Laws outlined in the regulations. They include issues such as rental of office space in medical facilities or equipment rental; physician recruitment or retention, group practice arrangements with a hospital, nonmonetary compensation arrangements, compliance training, and community-wide health information system support.
The Anti Kickback Statute and Stark Law: Synergy vs. Discontinuity
In recent years, federal authorities have begun tying two or even three laws against healthcare fraud and abuse together when pursuing claims against health care providers. Besides the Anti-kickback Statute and the Stark Law, the Federal False Claims Act has often been brought to bear on healthcare providers under investigation.
Of course, one of the most important differences is the applicability of criminal law vs. civil law. Many individuals who are found guilty of paying or accepting kickbacks go to prison for some time. They also face fines to make restitution to the federal health care programs they damaged through their kickback scheme.
One of the most obvious synergies is the requirements for contracts covering personal services rendered by physicians to DHS — a critical component of many organizations’ compliance program structures. Both Stark Law and the AKS have similar requirements for a minimum term of the arrangement, the compensation set in advance and the delineation of services provided. Both laws also define referrals in similar terms.
Both sets of regulations are updated to cover new compensation arrangements such as value-based care and electronic health records items and services.
In any case, penalties, especially for Stark Law violations, have been run up to dizzying heights by alleging that Stark Law violations lead to False Claims Act violations as well.
As the healthcare ecosystem continues to evolve in complexity, all healthcare providers must keep abreast of the changes to the legal framework — and maintain effective compliance practices as they operate and provide care. It can be easy to fall into noncompliance. Maybe the penalty will be monetary only, but there is still the threat of incarceration always just over the horizon!