Stark Law: What You Need to Know

compliance stark law Feb 23, 2023

The Stark Law, commonly known as the Physician Self-Referral Law, is a federal law that prohibits physicians from referring patients to any entity where they have a vested financial interest for “designated health services” that will be paid by Medicare or Medicaid. Physicians need to be careful to not violate this law by being aware of the ins and outs of it.  This is a distinct law not to be confused with the Anti-Kickback Statute, another federal law, which I will address in a later video and blog. Navigating through the Stark Law can be confusing, so I’m here to help you with the details. 


I want to give you a quick overview so that you know how to handle and more importantly, avoid any complications from violating the Stark Law on the federal level, which will have lots of applications for state law as well. I get questions every day from providers out there that are going out on their own, starting up their own practice, and just want to do things the right way. So, if that's you or that's a friend of yours, please get in touch with us at Functional Lawyer.

What is the Stark Law?

Stark Law is a federal law, and by its nature, it can only apply to federal issues or interstate commerce. It came into law initially in the 1980s. Then from 1993-1995, revisions were made.  And then finally came into full enforcement around 2002. Basically, the Stark Law is against self-referral. (An easy way to mnemonically remember this law is to note that both start with the letter “s.”) This is a law that prohibits physicians and providers in general from referring patients to a set of designated health services to get designated health services from an entity in which that provider or their immediate family member has an ownership interest or financial interest. This law only applies when federal payments are changing hands. So, Medicare (a federal program) and Medicaid (a joint federal & state program), are both implicated here. However, even if you're not under Medicare or Medicaid and you're not participating in those programs, for one reason or another, each state has its own laws that are like this, so you'd be well advised to at least listen to the concepts and then maybe go find out if your states are similar or sometimes the same as the federal law.  Now, there are some exceptions to that which I will discuss later.

Here’s an example of what the Stark Law prevents. I am a physician. I accept Medicare and other federal programs, and I own a radiology clinic or a portion of a radiology office down the street. I keep sending all my Medicare patients to this radiology imaging center because I know Medicare will pay me more, and I will receive this financial compensation. This kind of self-referral is what the Stark Law prohibits.

Exceptions to the Stark Law

What are the exceptions to Stark Law?

1) A physician’s employees or contractors are exempt from the self-referral law, if their services are supervised by the referring physician or by another physician in the same group practice. But keep in mind, group practice is a defined term, and it doesn't mean the common understanding of what a group practice is. There are specific qualifications you must meet to be a group practice under Stark.

2) The services are exempt if they are rendered in a building where the referring group physician furnishes non-designated health services, services, or in a centralized site used exclusively by a group for providing designated health services. All three of these must be true. Also, it must be built by the physician supervising the services or by a group practice in which that physician is a member or by an entity that is wholly owned by that physician or group practice. This exception is more for managed services organizations, or MSOs.

There are many more exceptions, including rental of office space. rental equipment, and bona fide employment relationships that are not tied to the number of referrals, money, compensation, appointments, or anything like that, that though that the physician is not compensated directly for any of that.

Designated Health Services Prohibited for Referral

What are the designated health services that are prohibited for referral?

There are 12:

  • the real clinical lab services,
  • physical therapy services,
  • occupational therapy services or OT,
  • outpatient speech language pathology,
  • radiology and certain other imaging,
  • radiation therapy,
  • durable medical equipment and supplies,
  • parenteral and enteral nutrients, equipment, and supplies,
  • prosthetics, orthotics, and prosthetic devices and supplies,
  • home health services,
  • outpatient prescription drugs,
  • and inpatient and outpatient hospital services.

If you do not own any of these things as separate from your entity, then Stark won't be an issue for you. But if you do, and you do several things to fall under the exceptions, including transact at arm's length, and you deal with fair market value, then you should be okay under the self-referral laws as well.


I will link under this video or in this blog, a full list and where you can go look at all the exceptions and see how you can comply with Stark. Remember Stark Law is distinct from the Anti-Kickback Statute. In a future video, we'll talk more about the Anti-Kickback Statute and how it relates to Stark, but they are separate, and they often are confused. So, stay tuned, and in the meantime, you can always reach out with any questions.






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