4 trends in the current Stark Law enforcement climate

With increased focus by the DOJ, cases expanding its reach and recent record-breaking settlements, Stark Law has proven it is a force to be reckoned with in the healthcare industry.

Looking at lawsuits and settlements as well as different agencies' commitment to Stark Law enforcement, industry experts identified four trends in the Stark Law enforcement climate.

1. Enforcement is more aggressive. "The proliferation of private whistle-blower suits alleging knowing Stark violations has greatly increased both the risk of discovery and enforcement and the potential financial liability associated with a violation," says Tony Burba, who is of counsel at Barnes & Thornburg in Washington, D.C., and a former federal healthcare fraud prosecutor.

Under the False Claims Act, healthcare providers can be liable for up to three times the amount of a fraudulent claim billed to the government, plus a substantial civil penalty for each individual claim submitted in violation of the law. "That means that for claims submitted by a hospital that knows or that is reckless in not knowing that they have a Stark violation — even a technical violation — could be forced to pay astronomical penalties under a settlement or judgment under the FCA," says Mr. Burba.

The case involving Tuomey Healthcare System in Sumter, S.C., is a good example of this. Although that case was unique in some respects, Mr. Burba says "it was fundamentally an FCA judgment in a Stark case." The 2013 judgment in that case was more than $200 million.

Stark Law enforcement has also increased over the last five years due to false claims liability through the Fraud Enforcement Recovery Act expanding to include the knowing retention of overpayments even when the overpayment did not result from the submission of a false record or statement. That change along with the Patient Protection and Affordable Care Act's requirements regarding obligations to return known overpayments within 60 days of "identification," has led to the increase in enforcement, according to Jana Kolarik Anderson, partner with Foley & Lardner in Jacksonville, Fla.

Under the 60-day repayment rule, any entity that receives an overpayment from the state or federal government must report the overpayment within 60 days. Although the 60-day repayment rule went into effect about three years ago, cases based on violations of the rule — called reverse false claims cases — began working their way through the system in 2014.

2. Stark Law is a growing area of interest for the DOJ. "The enforcement environment around the Stark Law is being primarily driven by False Claims Act cases brought by qui tam relators and/or by the U.S. Department of Justice," says Ms. Anderson. The government has dedicated substantial resources to fraud and abuse enforcement. For example, the government has invested substantial amounts into the Health Care Fraud Prevention and Enforcement Action Team — an interagency task force run by HHS and the DOJ that is focused on criminal and civil enforcement of healthcare fraud cases.

"We have seen the ramp up in enforcement on Stark Law issues and multi-million dollar settlements/verdicts, and there is no reason to expect that enforcement related to the Stark Law will not continue," says Ms. Anderson.

3. Stark Law enforcement isn't at the top of CMS' priority list. Although Stark Law enforcement is a growing area of interest for the DOJ, it remains lower on the priority list for CMS, according to Mr. Burba. Hospitals wanting to self-disclose Stark Law violations through CMS' Self-Referral Disclosure Protocol should be prepared to wait. "Even several years into the program, hospitals are seeing extended wait times and are waiting for months to see their disclosures resolved and settled," says Mr. Burba.

With rapid consolidation in the healthcare industry, sellers are feeling pressure to resolve Stark Law violations as liability can be transferred to buyers in hospital transactions. However, even when sellers do a thorough internal review and self-disclose problems they uncover, "both parties need to realize that it's unlikely the self-disclosure will be resolved prior to closing unless they are prepared for a significant delay," says Michelle Marsh, partner with Waller Lansden Dortch & Davis in Nashville, Tenn. 

However, Ms. Marsh says she is optimistic "that CMS will propose a more streamlined self-disclosure process for Stark violations that don't appear to result in program harm (e.g., missing signatures) that will provide providers with more certainty regarding penalty levels and also help both providers and the agency with the volume of information required for the self-disclosure process."

4. Stark Law is at a crossroads. During the last session of Congress, two incredibly different bills, both of which could have significant effects on Stark Law, were introduced. The first, called the Stark Administrative Simplification Act, seeks to correct the excessive penalties healthcare providers currently face for minor technical violations. The act is sponsored by Rep. Charles W. Boustany Jr., MD, (R-Louisiana), who is a cardiovascular surgeon with more than 30 years of clinical experience. Under the act, if a hospital violates Stark Law on purely technical grounds, the hospital would pay a preset fine. Mr. Burba says to think of this as a "speeding ticket approach."

Another bill, in committee at the same time, would have stripped out of the law the in-office ancillary services exception, which Mr. Burba says is "arguably the most relied upon exception" to Stark Law.

Although Stark Law generally prohibits self-referrals, the in-office ancillary services exception allows for the self-referral of advanced diagnostic imaging, radiation oncology and therapy services.

If the exception was done away with, "the change would not only result in converting thousands of previously legitimate relations into violations going forward, but would also operate to drastically reduce compensation available to physicians around the country," says Mr. Burba.

Regardless of whether either of the statutes is passed, "hospitals should expect the enforcement of Stark to grow more aggressive and more frequent, and should correspondingly continue to increase the resources they dedicate to compliance," says Mr. Burba.

In addition, because Stark Law violations do not require intent, "Stark frequently represents a more straightforward path for enforcement activity and therefore makes increased enforcement likely," says Ms. Marsh.


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