Stark Law Whistleblower Defined
- A Stark Law whistleblower is typically a healthcare professional or insider who reports illegal physician self-referrals that violate federal law and result in improper Medicare or Medicaid payments.
- For example, a doctor may refer patients to a hospital or lab that financially benefits from, which the Stark Law prohibits, even if the care is medically necessary.
What is the Stark Law?
The Stark Law, formally known as the Physician Self-Referral Law, broadly makes it illegal for physicians to refer Medicare patients for certain “designated health services” to any entity with which they, or an immediate family member, have a financial relationship, such as an ownership or investment interest or a compensation arrangement.
The Stark Law also prohibits hospitals and other healthcare entities that provide designated health services from submitting or causing the submission of claims for payment by Medicare for those services that were based on prohibited referrals. These prohibitions have been extended to payments for Medicaid patients.
The government and whistleblowers can bring False Claims Act lawsuits against physicians and health care providers, such as hospitals, that violate the Stark Law. The False Claims Act provides a way for the government to collect the money it paid for claims submitted in violation of the Stark Law.
The Stark Law helps ensure that doctors refer patients for treatment or services based on the needs of the patient rather than based on financial motives. When doctors or other healthcare providers benefit financially from referring patients to a particular hospital, laboratory or other healthcare provider, they are incentivized to send patients for treatments that are not medically necessary, which can be harmful to patients and cost the federal government money that could be used for medical treatment that is needed.
Academic studies have shown that physicians who had financial relationships with medical service providers used more of those providers’ services than similarly situated physicians who did not have such relationships.
The Stark Law and the Anti-Kickback Statute are similar in some ways, including that the laws have the same goals of protecting patients and preventing fraud and waste in the healthcare system. See our medical kickbacks page to learn about the differences between the the Stark Law and the Anti-Kickback Statute.
What does the Stark Law cover?
The Stark Law and its regulations generally apply to patient referrals by physicians with a prohibited financial relationship with certain “designated health services” (DHS), although there are exceptions. The Stark Law covers the following DHS:
- Clinical laboratory services
- Physical therapy services
- Occupational therapy services
- Outpatient speech-language pathology services
- Radiology and certain other imaging services
- Radiation therapy services and supplies
- Durable medical equipment and supplies
- Parenteral and enteral nutrients, equipment, and supplies
- Prosthetics, orthotics, and prosthetic devices and supplies
- Home health services
- Outpatient prescription drugs
- Inpatient and outpatient hospital services
Stark Law Exceptions That Allow Certain Referrals
Although the Stark Law generally prohibits physician self-referrals, federal regulations include narrow exceptions that permit certain financial relationships only if every requirement is strictly met. Many Stark Law whistleblower cases involve providers who incorrectly rely on one of these exceptions.
- In Office Ancillary Services: Permits referrals within the same physician group for certain designated health services provided in the same office, subject to strict supervision, location, and billing requirements.
- Office Space and Equipment Rental: Allows leasing arrangements only if they are in writing, last at least one year, reflect fair market value, and are not based on the volume or value of referrals.
- Physician Recruitment: Permits hospitals to offer limited financial incentives to recruit physicians, provided payments are time-limited, commercially reasonable, and not conditioned on referral activity.
- Non-Monetary Compensation: Allows modest non-cash benefits to physicians within annual regulatory limits, with violations occurring when caps are exceeded or compensation is not properly tracked.
- Fair Market Value Compensation: Allows payment for bona fide services if compensation is commercially reasonable, set in advance, and unrelated to the volume or value of referrals.
Healthcare entities frequently cite these exceptions to justify referral arrangements. When the regulatory requirements are not fully satisfied, resulting Medicare or Medicaid claims may violate the Stark Law and expose misconduct that a Stark Law whistleblower can report with the help of an experienced Stark Law attorney.
Steps a Stark Law Whistleblower Can Take
- Identify the parties and relationships involved: Note which physicians, hospitals, clinics, or healthcare entities may be involved in referral or compensation arrangements that raise concerns. A Stark Law attorney can help determine whether these relationships are legally relevant.
- Recognize potentially relevant information: Be aware of the types of information that may be important, such as compensation structures or referral patterns, without copying, removing, or accessing records improperly. A Stark Law attorney can advise on what information may be relevant and how it may be reviewed lawfully.
- Avoid internal reporting missteps: Internal complaints are not always protected and may affect eligibility for whistleblower rewards. Speaking with a Stark Law attorney before reporting concerns internally can help protect legal rights.
- Consult an experienced Stark Law attorney early: A qualified attorney can assess whether the conduct may violate the Stark Law, analyze whether any exceptions apply, and advise on appropriate next steps before any action is taken.
- Pursue a qui tam claim with legal representation if appropriate: Stark Law whistleblower cases are typically brought as qui tam actions under the False Claims Act and must be handled by an attorney to ensure compliance with procedural and confidentiality requirements.
- Maintain confidentiality under legal guidance: Disclosing concerns or information without legal advice can jeopardize a potential claim. A Stark Law attorney can advise on confidentiality obligations and available legal protections.
The Stark Law and Whistleblowers
Qui tam cases brought by whistleblowers have been very effective at helping the government collect money for claims that violated the Stark Law. Cases that involve Stark Law violations often also involve violations of the Anti-Kickback Statute, which prohibits payments to induce the use of federally funded healthcare services. Whistleblowers play an important role in protecting patients’ health and safety.
One of the biggest whistleblower cases involving Stark Law violations was brought by Phillips & Cohen clients against Adventist Health Systems. The whistleblowers’ qui tam lawsuit alleged a scheme to pay doctors excessive compensation in return for patient referrals to Adventist hospitals, clinics and other outpatient services in Florida, North Carolina, Tennessee and Texas.
The three whistleblowers reporting Stark Law violations were former Adventist employees: a risk manager, a director of physician services and a compliance officer.
Adventist paid the government $118 million to settle the whistleblower case.
A separate qui tam lawsuit filed by Phillips & Cohen settled for what was a significant amount paid by a single hospital in a case alleging Stark violations. Wheeling Hospital paid $50 million to the government to settle the whistleblower case, which was brought by a former executive vice president for the hospital.
The qui tam lawsuit alleged that the West Virginia hospital violated the Stark Law, the Anti-kickback Statute and the False Claims Act by paying improper compensation to doctors.
Enforcement – Stark cases against hospitals
There have been a number of government enforcement actions alleging Stark violations by hospitals. Those Stark cases often were initiated by whistleblowers who brought qui tam lawsuits.
Some of the largest hospital settlements that covered alleged Stark violations include:
- Adventist Health System – $118.7 million (2015) *
- Halifax Hospital Medical Center – $85 million (2014)
- William Beaumont Hospital – $84.5 million (2018)
- Tuomey Healthcare System – $72.4 million (2015 – settlement after $237 million judgment)
- Broward Health – $69.5 million (2015)
- Wheeling Hospital – $50 million (2020) *
- Columbus Regional Healthcare System – $35 million (2015)
- Mercy Hospital Springfield – $34.5 million (2017)
- Columbus (Ga.) Regional Healthcare System – $25 million (2015)
- Kalispell Regional Healthcare System – $24 million (2018)
- Westchester Medical Center – $18.8 million (2015)
- Vanguard Health Systems – $2.9 million (2015)
*Phillips & Cohen case.
History of the Stark Law
The Stark Law is named after its main sponsor in Congress, former US Rep. Pete Stark of California.
Congress first enacted the Stark Law in 1989, then passed additional legislation several years later that expanded the scope of the law.
Initially the Stark Law applied only to physician referrals for clinical laboratory services. The reason for the law was to prevent unnecessary medical testing that could raise the government’s overall healthcare costs.
Congress later amended the Stark Law to expand the types of health services covered and extended the prohibitions to Medicaid claims.
What should I do if I am aware of Stark Law violations?
The best advice for determining what to do about Stark Law violations is to discuss your options with a lawyer who is experienced in representing whistleblowers in Stark Law cases. The whistleblower lawyer can evaluate the evidence and discuss the pros and cons of pursuing a qui tam case.
If you would like to discuss possible Stark Law violations, speak with experienced whistleblower attorneys at Phillips & Cohen by contacting us for a confidential, free review.
Stark Law Whistleblower FAQs
What whistleblower reward range can apply in Stark cases?
If a Stark Law violation leads to a successful False Claims Act recovery, whistleblowers may be eligible to receive between 15 percent and 30 percent of the government’s recovery. Whether a reward applies and the potential percentage depends on multiple legal factors that should be reviewed with an attorney.
Who is eligible to be a Stark Law whistleblower?
Eligibility generally includes individuals with original, non-public information about potential Stark Law violations, such as healthcare employees, physicians, administrators, or billing professionals. Eligibility rules are complex, and speaking with a Stark Law attorney is essential before taking any action.
What 5 elements must exist for a Stark Law violation to occur?
From a legal standpoint, five elements generally must be present: a physician makes a referral for designated health services, the referral is for Medicare or Medicaid patients, the services are provided by an entity, the physician or an immediate family member has a financial relationship with that entity, and no Stark Law exception fully applies. Determining whether all elements are met requires a careful legal analysis by a Stark Law attorney.
Who investigates Stark Law violations?
Stark Law violations are typically investigated by federal agencies, including the Department of Justice, the Office of Inspector General of the Department of Health and Human Services, and sometimes the Centers for Medicare and Medicaid Services. Investigations often arise from whistleblower qui tam lawsuits filed with the assistance of an attorney.
What proof do you need to be a Stark Law whistleblower?
A whistleblower does not need to prove a case independently, but must be able to provide non-public, original information that suggests a Stark Law violation may have occurred. An experienced Stark Law attorney can evaluate whether the information is sufficient and advise how to proceed without risking legal or professional exposure.
How do Stark Law and the Anti-Kickback Statute differ?
The Stark Law is a civil statute that prohibits certain physician referrals regardless of intent, while the Anti-Kickback Statute is a criminal law that requires proof of intent to induce referrals. Conduct can violate one law, both laws, or neither. An attorney can assess which statute may apply based on the facts.