Stark Law

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Running head: THE STARK LAW

The Stark Law
Grand Canyon University
HLT 418
May 7, 2009
In this paper we will define what the Stark law is, its purpose and benefit to the health care industry and some major points of how it has evolved over the years. The Stark law was originally enacted in order to prevent physicians or physician groups from abusing their self-referral programs. Since its conception, it has evolved into three separate provisions which will be discussed in detail later on. Finally, we will give a couple of examples of how the Stark law has affected some of the local physician groups and hospitals in my area.

The Stark Law is the bill I have selected to discuss. In this paper I will define the Stark Law, examine the reason it came to being, and outline why it is a necessary bill for the overall well-being of the health care industry. I will also discuss some of the revisions made to the Stark Law, and, in addition, I will touch on some of its benefits, as well as give some of the arguments from those who oppose its restrictions. Finally, I will relate a recent personal experience where I have seen recent provisions to the law change the way my hospital and some of its physician groups operate. The Stark Law is a complex bill that was passed through congress in 1989. It was named after the United States Congressman Pete Stark, who was the original sponsor of the bill. The Stark Law is found in section 1877 of the Social Security Act. Although there have been several provisions since its birth, the Stark Law was initiated in order to prohibit a physician from making self-referrals for certain designated health services which are payable by Medicare or Medicaid to an entity with which the physician (or immediate family member of the physician) has a financial relationship with, (website, Physician self-referral is the best defined according to as, “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.” (website, The concern of physicians self-referring to themselves or immediate family members is that they would be more likely to order unnecessary exams such as labs, x-rays, MRIs or other medical tests that would “pad their pockets”.

Since its conception, the Stark Law has had three separate provisions over a two decade period. These provisions are known as Stark I, II, and III. Stark I was instilled as an exception to the Omnibus Budget Reconciliation Act of 1989 (OBRA 1989) which barred self referrals for clinical laboratory services under the Medicare program, (website, Stark II was established in 1993 when congress decided to broaden the Stark Law to also include self referrals to a wide range of “designated health services” (DHS). According to, DHS is defined as the following: a. General Principles

b. General Comment: Professional Services as DHS
c. Clinical Laboratory Services
d. Physical Therapy Services
e. Occupational Therapy Services
f. Radiology and Certain Other Imaging Services
g. Radiation Therapy
h. Durable Medical Equipment (DME)
i. Parenteral and Enteral Nutrients, Equipment, and Supplies Due to the fact that this new provision was very restrictive, causing some physician practices to rethink the way they did business, the HHS decided to roll out the Stark II in two phases to which allowed those affected plenty of time to adjust to the new law. Even though is was a more restrictive change, it is important to note that under Stark II, only the hospital was considered to be an entity furnishing designated health services; therefore, the Stark law did not prohibit the individual physicians from making referrals to hospital labs or imaging centers in which they had...
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