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CommercializationHospital Buyer & Reimbursement
Stark Law
Federal law restricting physician self-referral for designated health services.
Reviewed by Christian Espinosa, Founder, Blue Goat CyberLast reviewed May 5, 2026
Definition
The physician self-referral law (commonly Stark) prohibits physicians from referring Medicare patients to entities with which they (or immediate family) have a financial relationship for designated health services, unless an exception applies. Unlike the Anti-Kickback Statute, Stark is a strict liability civil law, so intent does not matter. Device companies feel it mainly through physician-owned entities and hospital arrangements. What the regulation says
The Stark Law, also known as the physician self-referral law, is a U.S. federal law (42 U.S.C. § 1395nn) that prohibits physicians from referring Medicare or Medicaid patients for certain "designated health services" (DHS) to entities with which the physician or an immediate family member has a financial relationship, unless an exception applies. This regulation aims to prevent conflicts of interest and reduce healthcare costs by eliminating referrals motivated by financial gain rather than patient need. The Centers for Medicare & Medicaid Services (CMS) is responsible for issuing regulations and guidance related to the Stark Law.What this means in practice
Particularly relevant to physician-owned ASCs, distributorships (PODs in spine), and equipment leasing arrangements.Examples
- A physician refers a Medicare patient for an MRI to a diagnostic imaging center in which the physician holds a direct ownership stake.
- A hospital employs a physician and pays them a salary that includes performance bonuses tied to the volume of referrals for inpatient services at the hospital.
- A medical device company provides free office space to a physician in exchange for the physician exclusively prescribing the company's devices to Medicare patients.
Common pitfalls
- •A common pitfall is misunderstanding the broad definition of "financial relationship," which includes both ownership/investment interests and compensation arrangements.
- •Another mistake is failing to document compliance with an applicable exception, as the burden of proof lies with the referring physician or entity.
- •Companies often err by not conducting thorough due diligence on potential referral sources, leading to inadvertent violations.
- •Assuming that an arrangement is permissible under other anti-fraud statutes, such as the Anti-Kickback Statute, means it will also satisfy Stark Law requirements, which is not always true.
- •Failing to regularly review and update compliance programs for Stark Law adherence can result in outdated practices and potential non-compliance.
Frequently asked questions
Designated health services (DHS) include a range of medical services such as clinical laboratory services, physical and occupational therapy, radiology services (including MRI, CT, and ultrasound), radiation therapy services, durable medical equipment, parenteral and enteral nutrients, prosthetics, orthotics, home health services, outpatient prescription drugs, and inpatient and outpatient hospital services.
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Sources
3 sourcesSources support the definition or relevant regulatory context, not necessarily every claim on this page. Each is graded against our source-tier hierarchy so you can see what rests on binding law versus commentary.
Tier 2Regulator guidance and consensus· 1Tier 4Trade press and expert commentary· 2
Link health: 3 verified· last checked 2026-06-20
CMS·1AdvaMed·1AHRMM·1
- 1CMS StarkTier 2 VerifiedCMScms.gov
- 2AdvaMed Code of EthicsTier 4 VerifiedAdvaMedadvamed.org
- 3AHRMM - Healthcare Supply ChainTier 4 VerifiedAHRMMahrmm.org
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