The Intersection Between the False Claims Act and the Federal Stark Law, Part I

An emergence of whistleblower cases citing the Stark Law has prompted us to take a look at this important piece of legislation – and how it intersects with the False Claims Act (“FCA”). Both statutes work to help eliminate fraud against the U.S. government. However, the Stark Law is more finely tuned toward prohibiting the specific act of misconduct involving physician kickbacks.

The Stark Law is not often enforced but has become popular thanks to a resurgence of FCA cases against healthcare fraud. These two statutes are interconnected so that the Stark Law defines the unlawful conduct while the FCA provides a vehicle by which whistleblowers and U.S. government agencies can enforce and punish the specific provisions of the Stark Law, which are described more specifically below.

History, Purpose and Key Provisions of the Stark Law

The Stark Law began in 1989 in its “Phase I,” which prohibited physicians from referring patients to a laboratory with which the physician or his immediate family member had a financial interest. The law was significantly expanded with its “Phase II” in 1993 as part of the Omnibus Reconciliation Act and grew to include ten categories of unlawful physician referral or kickback schemes.

The expanded version extended the definition of “financial interest” to include any direct or indirect ownership, including an investment relationship. From there, Congress cloaked the Department of Health and Human Services with the authority to enact additional prohibitions on physician conduct, including the highly-publicized anti-kickback laws prohibiting a doctor from financially benefitting from any arrangement to be submitted to Medicare, Medicaid or Tricare.

Penalties under the Stark Law are steep. If a physician or healthcare facility is found to be engaging in unlawful circumvention activity, it could face a $100,000 fine in addition to the fines imposed for each violation of the law. Practitioners may also be excluded from Medicare and Medicaid permanently or for a probationary period.

Stark Law and the False Claims Act

As we will explore in tomorrow’s post, the Stark Law and the federal False Claims Act often intersect to combat the growing problem of healthcare fraud against government healthcare agencies. While the provisions of the Stark Law are sparingly enforced by government initiation alone, the FCA has proven quite helpful in encouraging private individuals to come forward with allegations of unlawful kickback schemes.

While the Stark Law permits a private cause of action, the FCA is a much more attractive choice for plaintiffs as it offers the possibility of a 30 percent recovery in the event of a successful lawsuit. As such, the Stark Law has been cited with much more frequency, particularly in light of updates to the FCA under the Affordable Care Act and 2009’s Fraud Enforcement and Recovery Act.

Conclusion

In tomorrow’s post, we will explore several cases decided under the FCA and Stark Law in order to better understand how these two laws work together to prevent, prohibit and punish unfair kickbacks. As always, if you are aware of a kickback scheme in your place of employment, you are encouraged to meet with a whistleblower attorney right away.

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