Purpose of Stark Law
The Physician Self-Referral Law, commonly known as Stark Law, prohibits 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.
Designated Health Services
Designated health services (DHS) covered by Stark Law include clinical laboratory services, physical therapy, radiology, durable medical equipment, home health services, and inpatient and outpatient hospital services, among others.
Financial Relationships
A financial relationship under Stark Law can be an ownership or investment interest, or a compensation arrangement, such as a lease, employment contract, or professional services agreement between a physician and a DHS entity.
Exceptions
Because Stark Law is strict liability, exceptions are critical for legitimate business arrangements to continue. Common exceptions include the in-office ancillary services exception, bona fide employment relationships, and personal service arrangements, each requiring specific conditions such as fair market value compensation and written agreements.
Penalties
Violations can result in denial of payment for the improperly referred services, refund obligations, civil monetary penalties, and potential False Claims Act liability if claims are knowingly submitted in violation of Stark Law.
Self-Referral Prohibition
The core policy goal of Stark Law is to remove financial incentives that could improperly influence a physician's referral decisions, protecting patients and federal healthcare programs from unnecessary utilization driven by profit rather than clinical need.
Exam Tip
Remember that Stark Law is strict liability, meaning no proof of intent is required, unlike the Anti-Kickback Statute.