The Stark law has been on the books for more than three decades, but enforcement has never been more aggressive.
In 2024, seven major Stark law indictments contributed to a record-breaking 979 qui tam lawsuits, with False Claims Act settlements and judgments totaling $2.92 billion by the federal government’s fiscal year-end. Whistleblowers are more sophisticated, DOJ is more willing to litigate, and the cases coming through the courts are rewriting the compliance playbook for physician compensation, referral arrangements, and practice ownership.
These five cases show where the lines are drawn and where the next wave of enforcement is heading.
1. Community Health Network: $345 million (2023)
Indianapolis-based Community Health Network agreed to a $345 million settlement in December 2023 to resolve allegations that, dating back to 2008, it violated the False Claims Act and Stark law. The case stemmed from a whistleblower complaint filed in 2014 by the system’s former CFO and COO.
The U.S. complaint alleged that the health system’s senior management engaged in a scheme to recruit physicians with outsized pay to secure profitable referrals, with compensation paid to cardiologists, cardiothoracic surgeons, vascular surgeons, neurosurgeons and breast surgeons well above fair market value, and bonuses tied to the number of physician referrals. It remains the largest False Claims Act settlement based on Stark law violations in DOJ history.
In January 2025, Community paid an additional $135 million to settle the remaining portion of the same whistleblower case, bringing the total resolution to $480 million
The CHN case showed that if compensation is structured to reward referral volume, regardless of what a consultant’s appraisal says, DOJ could pursue it.
2. Covenant HealthCare: $69 million (2023)
Saginaw, Mich.-based Covenant HealthCare and two physicians paid $69 million in three civil settlements in March 2023 for allegedly improper arrangements with referring physicians. Among the claims, Covenant allegedly entered into contracts with physicians to serve as medical directors that did not satisfy any Stark law exceptions.
The Covenant case put medical directorship arrangements back under the microscope. Medical director contracts are common across hospitals and ASCs, but the case reinforced that nominal or above-market payments structured around physicians who generate significant referral volume will draw scrutiny regardless of how the arrangement is labeled.
3. St. Francis Health: $36.5 million (2023)
Columbia, S.C.-based St. Francis Health system agreed to pay $36.5 million in June 2023 to resolve allegations it violated Stark law by making payments to orthopedic surgeons tied to the volume or value of referrals.
For the ASC audience, this case carries particular weight. Orthopedics is the fastest-growing service line in the ASC space, and the financial arrangements between health systems and orthopedic surgeons, whether through employment, co-management agreements or joint ventures, are structurally complex.
4. Massachusetts Eye and Ear: $5.7 million (2023)
Boston-based Massachusetts Eye and Ear agreed to pay more than $5.7 million to settle allegations that parts of its physician compensation models violated Stark law. The hospital allegedly paid an affiliated physician group a percentage of its operating margin from facility fees, with the physician group then distributing a portion of those funds as bonuses to employed physicians based on performed services or hours worked.
The case established that routing facility fee revenue back to employed physicians through bonus structures, even when framed as productivity compensation, can trigger Stark liability.
5. Erlanger Health System (2026)
Chattanooga, Tenn.-based Erlanger Health System must defend against two False Claims Act lawsuits after a federal judge denied the system’s bids to dismiss the cases in March 2026. The DOJ’s lawsuit focuses on allegations that Erlanger billed the government for procedures performed by employed physicians whom the system allegedly compensated in violation of Stark law.
Erlanger has said it is “extremely comfortable” with its physician compensation processes and that in every instance it sets compensation based on amounts determined by outside consultants to be fair market value. The case signals that the DOJ is willing to challenge compensation arrangements even where health systems have followed standard fair market value processes, and that the outside consultant defense alone will not guarantee dismissal.
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