Health care fraud, waste and abuse can take many forms. From billing for services not rendered and up-coding to performing unnecessary procedures, health care and supplemental service providers are always coming up with new ways to defraud Medicare, Medicaid and insurance companies. The government is hard pressed to stay on top of all the plans and schemes being hatched.

So after studies in the 1980s revealed a connection between the volume of referrals by physicians to ancillary services organizations - such as laboratories and imaging centers - in which they had a financial interest, the Stark law was enacted. It addresses the idea that physicians’ professional medical judgment may be tainted by their financial interest in secondary services to which they are in a position to refer patients.

Although it contains various exceptions, the Stark law is powerful in that it can be violated unintentionally and still carry sanctions. If a physician makes an illegal referral, sanctions can include a prohibition to bill for the service, a requirement to refund any payments received for it, and a denial of the payment by Medicare or Medicaid.

“It’s very complicated and there are a lot of very technical requirements to the Stark law,” explains S. Craig Holden, President and Chief Operating Officer of law firm Ober| Kaler, in an interview at the ABA's National Institute on Health Care Fraud.  “And violations can result in, among other things, overpayments. Medicare can reclaim all the money billed pursuant to an inappropriate referral,” he says.

Voluntary Disclosure

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Because the requirements for the exceptions to the Stark law are so technical it’s not uncommon for physicians and service providers to inadvertently violate them. “For example, you have to have written signed agreements,” explains Holden. “If somebody forgot to sign it, you’ve got a technical violation.”

This became so common that Congress mandated that Centers for Medicare and Medicaid Service (CMS) establish a voluntary disclosure protocol for Stark violations. “That’s been up and running for over a year now and we’re starting to see some output,” says Holden, who has been spending a significant amount of his time dealing with voluntary disclosures since the protocol was established.

Advantages of Disclosure

By self-disclosing, companies can save themselves huge repayments. “You obviously are going to end up paying some money, but far less than you otherwise would,” says Holden. And the amounts can be staggering. “Theoretically, if you’re talking about a neurosurgeon referring to a hospital, it can be millions of dollars. The promise of the voluntary disclosure protocol is a lower liability.”

And that can mean the difference between life and death for some businesses. Aside from the huge repayments and fines, Stark law violations can result in exclusion from participating in the Medicare and Medicaid programs, which can be the death knell for a healthcare service provider.

Whistleblower Threat

Alongside the complexities of the Stark law, there is another variable that can complicate the road to self-disclosure. And that is the threat that a whistleblower will report a violation before the service provider does.

“The challenge in a lot of these cases is the data requirements for self-disclosure,” says Holden. You need to have identified a problem, completed your investigation and figured out what your potential overpayment liability is. “Billing in healthcare is sufficiently complex that this can take a while,” says Holden. “Sometimes, if you’re very worried about it, you might intentionally submit a disclosure lacking detailed information just to get it in the door, knowing you’re going to supplement.”