Stark law is one of the most consequential regulations governing financial relationships in healthcare, designed to prevent fraud and abuse in Medicare and Medicaid by prohibiting certain types of physician self-referrals.
Here are 10 key things to know, according to a recent post on law firm Eisner Gorin’s website:
1. The Stark law bans physicians from referring Medicare or Medicaid patients for designated health services to an entity with which the physician or an immediate family member has a financial relationship, unless an exception applies.
2. It is a strict liability law, meaning that even if a physician unknowingly violates the law, the act of making a prohibited referral itself triggers liability.
3. “Financial relationship” includes both ownership/investment interests and compensation arrangements. It applies to physicians, dentists, optometrists, chiropractors and surgeons. This covers everything from profit-sharing to consulting fees.
4. Stark law’s reach is extensive. Designated health services include:
- Clinical lab services
- Physical and occupational therapy
- Radiology (including MRI, CT and ultrasound)
- Durable medical equipment and supplies
- Home health services
- Prescription drugs
- Inpatient and outpatient hospital services
5. Some financial relationships are permitted if they meet detailed criteria, including:
- Bona fide employment: Compensation is for identifiable services, fair market value and not based on referral volume.
- Office space rental: Leases must be in writing, last at least a year and reflect fair market value.
- In-office ancillary services: Allows referrals for certain services within a physician’s practice, under specific conditions.
6. All compensation agreements should be in writing, signed and commercially reasonable. Payments must reflect fair market value, independent of referral volume. Providers should maintain clear, comprehensive records of all financial arrangements.
7. Penalties include:
- Denial of payment for designated health services provided via prohibited referrals
- Refund of improper payments
- Civil monetary penalties up to $15,000 per service
- $100,000 fines for schemes that attempt to circumvent the law
- Exclusion from Medicare and Medicaid participation
8. If a violation is discovered, providers can report it under the Self-Referral Disclosure Protocol with CMS. While disclosure does not guarantee immunity, it often leads to reduced penalties.
9. There are several recent developments are reshaping Stark law enforcement:
- Supreme Court rulings, such as Chevron deference reversal and Jarkesy v. SEC, may alter how courts interpret Stark-related penalties.
- Heightened scrutiny of private equity and ASCs is expected, especially around compensation and ownership structures.
- CMS reported a 552% surge in Stark-related self-disclosures since 2021.
10. Rachel Yount, an attorney with Mintz specializing in Stark law, told Becker’s that the previous Trump administration focused on reducing provider burden through regulatory modernization and an expanded self-disclosure program. She expects fewer major rule changes this term due to federal downsizing efforts but continued enforcement through the False Claims Act.
