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Stark Law & Healthcare


The original Stark Law enacted in 1989 only applied to referrals for clinical laboratory services. Those self-referral provisions prohibited a physician from referring a Medicare patient to a clinical laboratory with which the physician or an immediate family member had a financial relationship.

In 1993, Congress expanded the Stark Law to apply to referrals for not only clinical laboratory tests and services, but also an expanded list of "designated health services."

The present Stark law and regulations define the following as designated health services:    

  • Clinical laboratory services.
  • Physical therapy services.
  • Occupational therapy services.
  • Outpatient speech-language pathology services.
  • Radiology and certain other imaging services.
  • Radiation therapy services and supplies.
  • 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.
  • Inpatient and outpatient hospital services.

The expanded provisions also apply to Medicaid referrals as well as Medicare referrals. Presently, if a physician, or an immediate family member of the physician, has a financial relationship with an entity that provides the above listed designated health services the physician may not refer a Medicare or Medicaid patient to the entity unless a specific exception to the self-referral provisions exists.

It is also important to understand that the Stark Law prohibits an entity from submitting a claim to Medicare or Medicaid for any services that result from an arrangement that violates the self-referral prohibitions. Any reimbursement received as a result of a tainted relationship must be returned by the entity. 

Financial Relationship

The broad language of the Stark legislation defines a financial relationship as either an ownership/investment interest or a compensation relationship.

  • Ownership/investment interests may be through equity, debt or other means.
  • A compensation arrangement exists if anything of value (cash, goods, or services) is exchanged between a physician, or an immediate family member of the physician, and a provider of designated health services.


The penalties for violating the Stark self-referral provisions are significant. Anyone who submits a bill to the federal government that they know, or should know, is improper under Stark can be fined up to $15,000.00. Stark also contains penalty provisions for persons who enter into arrangements for the primary purpose of violating self-referral prohibitions. Any arrangement or scheme designed to ensure referrals between financially related parties may result in a penalty of up to $100,000.00.

In addition, the Office of Inspector General (OIG) may assess Civil Monetary Penalties as high as $50,000 for each violation, and the agency has the discretionary power to exclude any provider found liable under Stark from participation in the Medicare and Medicaid programs. Obviously, the consequences of violating the Stark provisions are severe.

Regulatory Exceptions

Physicians and designated health service providers may find relief from the broad prohibitions of the Stark Law in a number of specific exceptions to the self-referral legislation. The Stark Law exceptions detail a number of financial relationships and arrangements between physicians and designated health service providers that do not result in violations of federal law. For a particular financial relationship not to violate Stark, every one of the requirements of the Stark exception must be fulfilled. Exceptions exist for in-office ancillary services, personal service arrangements, rental of equipment and office space, and fair market value compensation.

Is your Lab Stark Law Compliant?

If you are looking for assistance to ensure your laboratory meets all Stark Law regulations, we encourage you to start a conversation. As one of the nation’s leading lab management consulting firms, we serve both independent and hospital-based labs. Our services include CAP, CLIA, and COLA consulting, laboratory planning, advisory services, and more. 

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