Stark Law

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Overview
Overview
Section 1877 of the Social Security Act (the Act) (42 U.S.C. 1395nn), also known as the physician self-referral law, or Stark Law, intends to prevent the misappropriation of or over utilization of healthcare that could result from incentivized diagnostic ordering protocols that may be a direct result of financial relationships that could influence healthcare decisions. The law is named for its author, United State Congressman Pete Stark, a Democrat from California, who authored and supported the creation of this piece of legislation.
The law’s purpose is to prohibit a physician from referring a patient for designated health services (DHS) to any organization that the physician or a member of his/her immediate
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This creates a dilemma for the state as it could risk loosing the matching federal Medicaid funds for such services if a violation occurs. For the purposes of this review, I will focus on Stark II Phase III of the final rule.
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The Stark Law was created to address the government’s concern that health care decision making could and have been influenced unduly by a profit motive. It was determined, in my opinion, that if physicians have a financial incentive to refer to an institution that they have a financial interest in, this relationship could have an affect on utilization, patient choice, and competition. Traditionally, physicians and healthcare providers generate reimbursement based upon the quantity of services and procedures performed and evidence through the billing process. Unfortunately the minority section of less than ethical providers began to realize that without regulatory oversight, a great deal of money could be made by the creation of vertically integrated business models. By allowing this avenue for additional reimbursement, physicians could begin to order testing and procedures that may have not been ordered without the

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