Are you familiar with the Physician Self-Referral Law—a.k.a, The Stark Law?

Posted on 30 Oct, 2017 |comments_icon 2|By Elizabeth

More than two decades ago, a few legislators with good intentions wanted to prevent conflicts of interest in medical decision making that involved Medicare and Medicaid beneficiaries. Starting with clinical labs, Congress began to pass laws prohibiting physicians from referring patients to designated health services (DHS) in which they or their family members had ownership interests.

Early convolutions. In the years since the Stark laws were enacted, wave after wave of regulations have explained how to obey the statutes. As a result, you’ll see lingo like ‘Stark Phase I,’ ‘Stark Phase II,’ and ‘Stark Phase III.’ The law’s namesake, former Rep. Fortney ‘Pete’ Stark (D., Calif.), once said that had he known the regulatory maze that would ensue, he wouldn’t have voted for the law.

Why you should pay attention to Stark

Stark is not a criminal statute, which means you won’t go to jail if you break this law. It’s a civil statute enforced by CMS. If you violate Stark, you could face civil monetary penalties and exclusion from Medicare and other federal health programs. Stark violations, however, may transgress or involve criminal compliance statutes, like the False Claims Act.

Cases like Tuomey and Halifax show that regulators are keen to couple Stark with the False Claims Act to ramp up fraud recoveries, observes Wayne Miller, a healthcare attorney based in Los Angeles, CA. “What might be seen as a technical violation can lead to huge liabilities per provider,” Miller explains.

Stark exceptions make the business of healthcare possible

The biggest criticism of Stark is that it’s an old, impractical set of regulations that blocks business arrangements that have the potential to benefit healthcare delivery in 2017 and beyond. The law’s intentions are good, but its applications add unnecessary complexity.

Federal regulators have responded to this criticism by creating a long list of exceptions to Stark. That’s why most business deals that involve physicians need a flock of healthcare attorneys to review them.

Taking Exception

Stark complicates business relationships involving physicians, but it doesn’t make them impossible.

“There are exceptions to the financial relationships under the Stark Law such as for rental of office space, bona fide employment relationships, and personal service arrangements,” explains Katherine Becker, JD, LLM, CHC, CHPC, CPC, associate consultant at Acevedo Consulting, Inc. in Delray Beach, FL. “There are very specific requirements that must be met in order to fall into the exceptions that can include the agreements being in writing, the duration of the agreement, as well as whether the terms are consistent with fair market value.”

When your physician makes a referral for a DHS, you should determine if the referral complies with your practice’s compliance plan as it relates to the Stark Law. If your physician or any immediate family member does have a financial relationship with an entity that is providing the DHS, then, as part of your plan, you should check if the arrangement fits into one of the Stark Law exceptions and consult an attorney to review the business arrangement. If it fits, then you can refer Medicare patients to that entity for DHS with confidence; otherwise, you are risking violation of the Stark Law.

Heads up: If you are not sure if your referral is within the parameters of the Stark Law, seek legal help. “Physicians entering financial relationships should seek the advice of their healthcare attorney to make sure that their agreements are in compliance with Stark, as well as other federal regulations, such as the Anti-Kickback Statute,” Becker adds.

Brenda Laigaie of Wade, Goldstein, Landau & Abruzzo, who presented at the American Academy of Ophthalmology in 2016, noted that there are exceptions made when constructing business arrangements so that they will comply with Stark.

Here’s a list of those exceptions:

  • Physicians’ services
  • In-office ancillary services
  • Rental of office space, rental of equipment
  • Personal services arrangements
  • Bona fide employment relationships
  • Isolated transactions
  • Timeshare arrangements
  • FMV compensation

There are many more, as Stark exceptions are numerous, not to mention that the structure of business arrangements that comply with Stark vary. Beyond iterating a complete list of detailed exceptions, which you’ll find in the reference following this post, we can show you how physicians and attorneys might work together to structure sound, ethical business arrangements that benefit healthcare delivery and comply with the law.

From start to finish, The Physician Practice Compliance Sourcebook will equip you to plan and execute a compliance program that meets the Stark Law—and other federal and state laws requirements.


42 CFR 411.357 lists and describes all the Stark exceptions and is available here:



Elizabeth works on an array of projects at TCI, researching and writing about modern reimbursement challenges. Since joining TCI in 2017, she has also covered the nuts and bolts of cybersecurity, compliance with federal laws, and how to tap into the advantages of telehealth services.

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