Stark Law

The Stark Law (42 USC 1395nn) is a federal civil statute that prohibits a physician from referring Medicare or Medicaid patients for designated health services (DHS) to an entity with which the physician (or an immediate family member) has a financial relationship, unless the relationship qualifies for a statutory or regulatory exception. The statute imposes strict liability, with no intent element, and produces denial of payment, refund obligations, civil monetary penalties, and exclusion. Stark violations also support False Claims Act liability on every tainted claim.

How the Stark Law works

Stark analysis runs in two steps. First, identify whether a referral implicates DHS (clinical laboratory services, physical therapy, occupational therapy, radiology, radiation therapy, durable medical equipment, parenteral and enteral nutrients, prosthetics and orthotics, home health services, outpatient prescription drugs, and inpatient and outpatient hospital services). Second, identify whether the referring physician has a financial relationship with the entity providing the DHS (direct ownership, indirect ownership through a related entity, or a compensation arrangement of any kind).

If both elements are present, the referral is prohibited unless the financial relationship fits a Stark exception. Exceptions at 42 CFR 411.350 through 411.357 cover scenarios like rental of office space (with fair market value, written terms, signed agreement, and required scope), bona fide employment, personal service arrangements, in-office ancillary services, physician services within a group practice, and many others. Each exception has specific elements. Failing one element of one applicable exception is enough to make the referral a Stark violation, even where the parties acted in good faith and even where the compensation was fair market value.

When the Stark Law applies

Stark applies to physician referrals (only physicians; not other practitioners) for designated health services payable by Medicare or Medicaid. It does not reach commercial business. The strict liability framework distinguishes Stark from the Anti-Kickback Statute (which requires intent) and from state self-referral laws (which vary by state and may add or substitute requirements). The Self-Referral Disclosure Protocol at 42 USC 1395nn(g)(5) provides a mechanism for self-disclosing technical Stark violations to CMS with reduced exposure.

The provider's exposure under the Stark Law

The primary exposure is denial of payment on every claim for DHS produced by a prohibited referral, plus refund obligations on every claim already paid. Per-claim civil monetary penalties run up to $15,000 per service and $100,000 per circumvention scheme. Mandatory exclusion may follow knowing violations under 42 USC 1320a-7(b)(7). The compounding exposure is FCA liability: every claim submitted under a Stark-tainted relationship can be a "false claim" producing treble damages plus per-claim penalties. The defense framework focuses on exception qualification, the Self-Referral Disclosure Protocol where technical violations exist, and the materiality and knowledge defenses where FCA liability is asserted on Stark-based theories.

Related terms

• Anti-kickback statute The parallel criminal statute that addresses similar conduct under an intent-based framework.
• False Claims Act The civil framework that produces treble damages on every claim tainted by a Stark violation.
• Qui tam The whistleblower mechanism through which many Stark cases reach DOJ.

See also

• Practice area
  Healthcare Fraud Defense

  The full healthcare fraud defense framework including Stark, AKS, and FCA coordination.

• Practice area
  OIG Self-Disclosure Defense

  Self-Referral Disclosure Protocol counsel for technical Stark violations and the broader OIG self-disclosure framework.

• Practice area
  False Claims Act Defense

  Defense framework for FCA cases that build on Stark violations as the underlying claim taint.