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Impact of Stark Law

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Question :


Evaluate the impact Stark Law has on the health care industry.

Evaluate what impact the legal and regulatory requirements of the Stark Law has on the health care industry.

Analyze the role accreditation and regulatory agencies play in Stark Law


Answer :


Impact of Stark Law

Stark law is a United States healthcare fraud and abuse law that has been developed to prevent referral of a patient by physicians for specific designated healthcare services paid for by Medicare to any healthcare organization in which physicians have a financial relationship. The federal government has defined the term "financial relationship" as indirect or direct investment interest or ownership by the physicians who are referring to a patient (McCarthy & Huang, 2018). It also includes financial interest possesses by any immediate family member of the physician. 

The purpose of Stark law is to ensure that patients are receiving quality healthcare services. The Stark Law focuses on making it a priority of all physicians as well as MSPs to provide quality healthcare services to patients. The violation of this law may lead to penalties of up to $15,000 for every billed service which is based on a prohibitable referral. Stark law has a significant impact on the healthcare industry as it helps in improving the quality of care. It has set the priority of physicians that is necessary to provide quality healthcare services. The exploitation of patients for financial benefits has been prevented with the help of this law. It has significantly eliminated fraud and abuse from the healthcare industry (Kanter & Pauly, 2019). It has also improved the relationship as well as incentives that are necessary to improve the quality of healthcare services.

The legal and regulatory requirements of Stark law has also a significant impact on the healthcare industry. The legal and regulatory requirements of the law prohibit physicians to refer a patient to a medical facility for financial interest. Referring to a patient by physicians to a medical facility for financial gain leads to overutilization of medical services that ultimately lead to a significant increase in healthcare costs. Apart from this, the system of referring patients by physicians to a medical facility for financial gain will create a captive referral system and hence it will reduce the competition by other healthcare service providers. Therefore, it is necessary to protect the interest of all medical service providers and develop a healthcare system that can ensure quality healthcare service to patients. Legal and regulatory requirements of the law ensure the above.

Accreditation and regulatory agencies play a very important role in stark law. Accreditation as well as regulatory agencies review the stark law and modify the legal and regulatory requirements of the law to ensure the quality of healthcare services. Accreditation and regulatory agencies are committed to improving patient safety and the interest of all medical service providers. They protect the interest of all medical service providers by ensuring fair competition in the healthcare industry (Butler, 2016). They define the terms of service and penalties for violating the rules set underneath Stark law. It helps in enforcing the law effectively throughout the healthcare industry. Thus, the law is effective and being implemented effectively by the efforts of accreditation and regulatory agencies. 


Butler, K. H. (2016). Stark law reform: Is it time. Journal of Health Care Compliance, November–December, 5-14.

Kanter, G. P., & Pauly, M. V. (2019). Coordination of care or conflict of interest? Exempting ACOs from the Stark Law. N Engl J Med, 380(5), 410-411.

McCarthy, I., & Huang, S. S. (2018). Vertical alignment between hospitals and physicians as a bargaining response to commercial insurance markets. Review of Industrial Organization, 53(1), 7-29.


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