Healthcare providers facing a Stark Law or Anti-Kickback Statute investigation risk severe consequences, including federal criminal charges carrying up to 10 years in prison and civil penalties exceeding $100,000 per violation. These federal fraud laws target financial arrangements between physicians and healthcare entities that could compromise patient care or inflate taxpayer costs. If you’re under investigation, understanding what you’re facing and taking immediate action can mean the difference between protecting your medical license and losing everything.
At Varghese Summersett, our federal criminal defense attorneys have represented physicians, healthcare executives, and medical practice staff in complex healthcare fraud investigations across Texas. We understand how federal prosecutors build these cases and how to challenge their methodology from day one.
What Is the Stark Law?
The Stark Law, officially known as the Physician Self-Referral Law, is a federal civil statute that prohibits physicians from referring Medicare or Medicaid patients to healthcare entities where the physician or an immediate family member has a financial interest. Named after its sponsor, Congressman Pete Stark, this law is codified at 42 U.S.C. § 1395nn and applies to referrals for “designated health services.”
Unlike many federal laws, Stark is a strict liability statute. This means intent does not matter. A physician can violate the Stark Law without ever intending to do anything wrong. Even an accidental referral to a facility where the physician holds an ownership stake triggers penalties if no exception applies.
What Services Does the Stark Law Cover?
The Stark Law applies specifically to referrals for designated health services (DHS) payable by Medicare or Medicaid. These services include clinical laboratory services, physical therapy services, occupational therapy services, radiology services (including MRIs, CT scans, and ultrasounds), radiation therapy services and supplies, durable medical equipment and supplies, parenteral and enteral nutrients (equipment and supplies), prosthetics, orthotics, and prosthetic devices, home health services, outpatient prescription drugs, inpatient and outpatient hospital services, and outpatient speech-language pathology services.
A physician referring a patient to any of these services at an entity where they hold a financial interest creates potential Stark Law exposure unless a specific exception applies.
What Are the Penalties for Stark Law Violations?
Stark Law violations carry severe financial consequences that can destroy a medical practice. Current penalties include civil fines of up to $15,000 for each service provided as a result of an improper referral, additional penalties up to $100,000 for schemes designed to circumvent the law, repayment of all Medicare and Medicaid claims submitted in violation (often spanning years of billing), treble damages (three times the improper payment amount), and exclusion from Medicare and Medicaid programs. For many healthcare providers, exclusion from federal healthcare programs is the most devastating penalty because it effectively ends their ability to practice medicine.
What Is the Anti-Kickback Statute?
The Anti-Kickback Statute (AKS), codified at 42 U.S.C. § 1320a-7b, is a federal criminal law that prohibits offering, paying, soliciting, or receiving anything of value to induce or reward referrals for services covered by federal healthcare programs. Unlike the Stark Law, AKS violations require proof of knowing and willful conduct, but this statute carries the additional threat of federal prison time.
The statute’s reach is broad. “Remuneration” includes cash payments, gifts, free services, below-market rent, and any other transfer of value. The law applies to everyone involved in the referral chain, not just physicians.
What Are the Penalties for Anti-Kickback Violations?
Because the Anti-Kickback Statute is a criminal law, penalties are far more severe than Stark violations. Criminal penalties include up to $100,000 in criminal fines per violation and up to 10 years in federal prison. Civil monetary penalties under the CMPL add $100,000 per kickback, plus three times the remuneration amount. Violators also face mandatory exclusion from federal healthcare programs. Additionally, each improper claim triggered by a kickback arrangement can constitute a separate False Claims Act violation, adding penalties of up to $27,894 per claim plus treble damages.
How Do Stark Law and Anti-Kickback Violations Differ?
While both laws target improper financial relationships in healthcare, they differ in critical ways. The Stark Law is a civil statute with strict liability, meaning no intent is required for violation. It applies only to physician referrals for designated health services billable to Medicare. The Anti-Kickback Statute is a criminal law requiring proof of knowing and willful conduct. It applies to anyone involved in federal healthcare referrals, not just physicians, and covers all services reimbursed by federal programs.
Many healthcare arrangements violate both laws simultaneously. When this happens, prosecutors can pursue civil Stark penalties, criminal AKS charges, and False Claims Act liability in the same investigation.
What Triggers a Federal Healthcare Fraud Investigation?
Federal investigations into Stark and Anti-Kickback violations typically begin through one of several channels. Whistleblower lawsuits under the False Claims Act’s qui tam provisions allow current or former employees, competitors, or even patients to file suit on behalf of the government and share in any recovery. In fiscal year 2024, qui tam lawsuits contributed to a record 979 cases and $2.92 billion in False Claims Act recoveries.
The FBI’s Healthcare Fraud Unit, the HHS Office of Inspector General, and State Attorneys General Medicaid Fraud Control Units also conduct proactive investigations using data analytics to identify suspicious billing patterns. Routine audits can uncover problematic referral arrangements, and former business partners or disgruntled staff members often provide tips that trigger investigations.
Common Conduct That Leads to Federal Charges
Healthcare fraud prosecutions often involve patterns that may seem like legitimate business practices. Examples include physicians receiving above-market compensation from hospitals that benefit from their referrals, medical directors receiving payments that exceed fair market value for actual services, pharmaceutical or medical device companies providing free items or services to prescribers, healthcare entities offering free or discounted rent to referring physicians, paying per-patient fees to patient recruiters or marketing companies, waiving copays or deductibles to attract patients for federal program billing, and physicians referring patients to labs, imaging centers, or other facilities they own.
What Should You Do If You’re Under Investigation?
If federal agents contact your office or you learn of an investigation into your billing practices, your response in the first days matters enormously. Do not speak with investigators without legal counsel present. Even honest answers can be misinterpreted or used to build a case against you. Contact a federal criminal defense attorney immediately who has experience with healthcare fraud prosecutions.
Preserve all documents and electronic records. Do not delete, alter, or destroy anything, as this can create separate obstruction charges. Begin identifying and organizing relevant contracts, compensation arrangements, and referral documentation. Your attorney can assess whether a voluntary self-disclosure to the OIG might reduce your exposure.
Defense Strategies in Healthcare Fraud Cases
Effective defense against Stark and Anti-Kickback allegations requires understanding how federal prosecutors build these cases and where their methodology can be challenged. Defense strategies may include demonstrating that compensation arrangements fall within statutory exceptions or safe harbors, challenging the government’s fair market value analysis, showing absence of intent for Anti-Kickback charges, disputing the classification of services as designated health services, and proving that referrals were based on legitimate medical judgment rather than financial interest.
Early intervention often yields the best results. Presenting evidence of compliance efforts and lack of corrupt intent before indictment can sometimes convince prosecutors to decline charges or pursue civil rather than criminal remedies.
Safe Harbors and Exceptions
Both the Stark Law and Anti-Kickback Statute include exceptions and safe harbors that protect legitimate business arrangements. Stark Law exceptions cover arrangements like bona fide employment relationships, personal services contracts meeting specific requirements, physician recruitment in underserved areas, and in-office ancillary services. Anti-Kickback safe harbors protect properly structured investment interests, space and equipment rental at fair market value, personal services and management contracts, certain discount arrangements, and payments to bona fide employees.
Whether your arrangement qualifies for protection depends on meeting every requirement of the applicable exception. Close doesn’t count. An arrangement that fails to meet just one element of a safe harbor offers no protection.
Why You Need Experienced Federal Defense Counsel
Healthcare fraud investigations are among the most complex federal cases. The government typically spends months or years building its case before you learn you’re a target. Agents review years of billing records, interview staff members, and work with forensic accountants to calculate alleged losses.
At Varghese Summersett, our federal criminal defense team has the experience to meet prosecutors on equal ground. We engage our own medical billing experts and forensic accountants. We understand how to challenge the government’s damage calculations and demonstrate that arrangements complied with applicable laws. Most importantly, we know when to negotiate and when to fight.
If you’re facing a federal healthcare fraud investigation in Texas, contact Varghese Summersett today at (817) 203-2220 for a free consultation. The earlier you get experienced counsel involved, the more options we have to protect your practice, your license, and your freedom.
Frequently Asked Questions
Can I go to prison for a Stark Law violation?
Stark Law violations alone are civil, not criminal, so they do not carry prison time. However, many Stark violations also violate the Anti-Kickback Statute, which is a federal crime punishable by up to 10 years in prison. Prosecutors frequently pursue both types of charges in the same investigation.
What is the difference between a kickback and a legitimate referral fee?
The Anti-Kickback Statute prohibits any payment intended to induce referrals for services covered by federal healthcare programs. Legitimate arrangements, such as fair market value payments for actual services or properly structured co-management agreements, may qualify for safe harbor protection. The distinction often depends on whether the payment’s true purpose is compensating services or generating referrals.
How long do federal healthcare fraud investigations take?
Federal investigations typically last one to three years before the government decides whether to pursue charges. Complex cases involving multiple defendants or large-scale billing fraud can take even longer. During this time, the government reviews records, interviews witnesses, and works with experts to calculate alleged damages.
What should I do if a former employee files a whistleblower lawsuit?
Qui tam lawsuits are filed under seal, meaning you may not learn about them until the government decides whether to intervene. If you become aware of a potential whistleblower suit, contact a federal defense attorney immediately. Do not attempt to contact the whistleblower or take any action that could be construed as retaliation.
Can my medical license be affected by a Stark or Anti-Kickback violation?
Yes. Beyond federal penalties, Texas Medical Board disciplinary action often follows healthcare fraud allegations. Exclusion from Medicare and Medicaid, which accompanies many fraud findings, effectively prevents you from practicing medicine even if your license remains technically active. A conviction or civil finding can also trigger malpractice insurance issues and hospital credentialing problems.
