Health systems need to navigate complex legal frameworks to ensure compliance with federal regulations. One such regulation is the Stark Law, which prohibits physicians from making referrals to entities with which they have a financial relationship unless specific exceptions apply.
Allegations of Stark Law violations can arise in many different situations, such as a recent case where the government has accused a health system of paying physicians above average to control where the physicians refer their patients. Officials viewed this as an overpayment for financial incentive in violation of the Stark Law.
What are the legal implications of a violation?
Consequences can include:
- Financial penalties: Violations can result in substantial fines. Health systems may face civil penalties for each violation, which can accumulate quickly. In the case noted above, Community Health Network has agreed to settle the matter for $135 million.
- Exclusion from federal programs: Entities found in violation may be excluded from participating in Medicare and Medicaid, impacting their revenue streams. This is a huge issue for health systems and likely part of the reason Community chose to settle the matter instead of move forward with litigation.
- Reputational damage: Allegations can harm a health system’s reputation, affecting patient trust and relationships with other healthcare providers.
It is important for healthcare leaders to understand the legal implications of Stark Law violations as they can have long-lasting effects.
How can I mitigate the risk of allegations of a violation?
This is not the first time Community Health Network has faced allegations of a Stark Law Violation. The health system faced similar allegations in 2023. It chose to settle the matter at that time as well, agreeing to pay more than $400 million at the time. Healthcare organizations are wise to learn from this case and take proactive steps to avoid similar allegations of wrongdoing. Use of regular internal audits of physician compensation arrangements can help to reduce the risk of allegations of a violation. It is also helpful to implement training programs for staff and physicians to educate them about Stark Law requirements.
Attorney John Rivas is responsible for this communication.