Stark Law

Stark law, actually three separate provisions, governs physician self-referral for Medicare and Medicaid patients. The law is named for United States Congressman Pete Stark, who sponsored the initial bill.

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Physician self-referral

Physician self-referral is the practice of a physician referring a patient to a medical facility in which he has a financial interest, be it ownership, investment, or a structured compensation arrangement. Critics of the practice allege an inherent conflict of interest, given the physician's position to benefit from the referral. They suggest that such arrangements may encourage over-utilization of services, in turn driving up health care costs. In addition, they believe that it would create a captive referral system, which limits competition by other providers.

Others respond to these concerns by stating that while problems exist, they are not widespread. Further, these observers contend that, in many cases, physician investors are responding to a demonstrated need which would otherwise not be met, particularly in a medically underserved area.

Legislation

Congress included a provision in the Omnibus Budget Reconciliation Act of 1989 (OBRA 1989) which barred self-referrals for clinical laboratory services under the Medicare program, effective January 1, 1992. This provision is known as "Stark I". The law included a series of exceptions to the ban in order to accommodate legitimate business arrangements. A number of observers recommended extending the ban to other services and programs. The Omnibus Budget Reconciliation Act of 1993 (OBRA 1993) expanded the restriction to a range of additional health services and applied it to both Medicare and Medicaid; this legislation, known as "Stark II," also contained clarifications and modifications to the exceptions in the original law. Minor technical corrections to these provisions were included in the Social Security Amendments of 1994.

Passage of Stark II raised a series of concerns on the part of many provider groups. While Stark I and II were intended to remove potential conflicts of interest from physician decision making, a number of persons have argued that the legislation, particularly parts of Stark II, represents an unwarranted intrusion into the practice of medicine. They have stated that the legislation, particularly the provisions relating to compensation arrangements, is too complex and may, in fact, impede physicians' ability to participate in managed care networks.

On November 20, 1995, Congress gave final approval to the conference report on the Balanced Budget Act (BBA) of 1995. President Clinton vetoed the measure on December 6, 1995. BBA included several amendments to the physician self-referral provisions. The two major changes were the repeal of the prohibitions based on compensation arrangements and the reduction in the list of services subject to the ban.

The Federal Register announced that publication of Stark III has been extended until March 26, 2008, and Phase II will remain in effect through that date.

The Stark Law is related to, but not the same as, the federal anti-kickback law.

Lawyers and laypersons can find Stark at [42 U.S.C.S. §1395nn] which is §1877 of the Social Security Act. Additionally, the regulations are at [42 C.F.R. §411.350 through §411.389].

See also

• Omnibus Budget Reconciliation Act of 1989 (P.L. 101-239)
• Omnibus Budget Reconciliation Act of 1993 (P.L. 103-66)
• Social Security Act Amendments of 1994 (P.L. 103-432)