Stark Law: Physician Self-Referral Prohibition
The Stark Law (the physician self-referral law) prohibits a physician from referring Medicare or Medicaid patients for certain "designated health services" to an entity with which the physician (or an immediate family member) has a financial relationship, unless an exception applies. It is a strict-liability statute, so intent is not required — a violation makes the claim non-payable.
- Enforced by
- CMS / DOJ
- Applies to
- Physician referrals for Medicare/Medicaid DHS
- Penalty
- Denied/refunded claims, CMPs, FCA exposure
What is the Stark Law?
The Stark Law bars a physician from steering Medicare and Medicaid patients to entities the physician has a financial stake in, for a defined set of services. Named for Rep. Pete Stark, it targets the conflict of interest that arises when a doctor profits from their own referrals. It is strict liability: the government does not have to prove the physician meant to do anything wrong — if the arrangement does not fit an exception, it violates the law.
That strictness is what makes Stark so consequential for billing: a technically deficient lease or compensation arrangement can make otherwise-clean claims non-payable.
What services does it cover?
Stark applies only to referrals for designated health services (DHS) — clinical lab, imaging and radiology, PT/OT/speech, radiation therapy, DME, prosthetics/orthotics, home health, outpatient drugs, parenteral/enteral nutrition, and inpatient and outpatient hospital services. A cardiologist referring to their own in-office lab, or a group with an ownership interest in an imaging center, is squarely in Stark territory.
How do exceptions work?
Because the prohibition is broad and strict, everything depends on fitting an exception — in-office ancillary services, bona fide employment, fair-market-value compensation, space and equipment leases, and others. Each exception has precise requirements (written, signed, FMV, commercially reasonable, set in advance).
What does Stark mean for billing?
Billers rarely draft the arrangements, but they submit the claims that ride on them. If a DHS arrangement is non-compliant, the entity cannot bill Medicare for those services and must refund what it collected — which pulls in the 60-day overpayment rule. Watch for referral patterns that concentrate DHS at physician-owned entities, keep contracts and signatures current, and flag Stark-adjacent items that surface on the OIG Work Plan. Pair Stark analysis with the Anti-Kickback Statute, since many arrangements must satisfy both.
Frequently asked questions
It prohibits a physician from referring Medicare or Medicaid patients for designated health services to an entity the physician (or an immediate family member) has a financial relationship with — ownership, investment, or compensation — unless a specific statutory or regulatory exception is met. If the referral is prohibited, the entity cannot bill Medicare for the service and any payment received must be refunded.
Stark is a strict-liability civil statute limited to physician self-referral for designated health services — intent does not matter, and if no exception fits, it is violated. The Anti-Kickback Statute is a criminal, intent-based law covering any remuneration to induce referrals of any federal health-care business. Many arrangements must satisfy both a Stark exception and an AKS safe harbor.
DHS are the specific service categories Stark covers: clinical lab services, physical/occupational therapy and speech-language pathology, radiology and imaging, radiation therapy, DME, parenteral and enteral nutrients, prosthetics and orthotics, home health, outpatient prescription drugs, and inpatient and outpatient hospital services. Referrals for these to a financially related entity trigger Stark analysis.
Sources & further reading
Reviewed by the ImmediCare Solutions RCM team
Certified billers and coders handling claims across 50+ specialties nationwide. This entry is reviewed against current payer policy and CMS rules. Last review: Jul 5, 2026.
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