Stark Law

What Is Stark Law?

First enacted by Congress in 1989, Section 1877 of the Social Security Act (referred to as the “Physician Self-Referral Law” or, more commonly, “Stark Law”) was implemented to protect Medicare and other beneficiaries from costs associated with physician referrals for clinical laboratory services with which they had a direct financial relationship. As part of the Omnibus Reconciliation Act of 1993, Stark Law was further expanded (Section 1903) to prohibit all referrals to Designated Health Services (DHS) payable by Medicare with which the physician (or an immediate family member) has a financial relationship, unless an exception applies.

Since then, the Centers for Medicare & Medicaid Services (CMS) has published a number of rules and regulations interpreting the Stark Law statute, defining covered DHS entities and penalties for non-compliance.

The Importance of Complying with Stark Law

Federal fraud and abuse laws include the Physician Self-Referral Law [42 U.S.C. § 1395nn], commonly referred to as the Stark law, which prohibits physicians from referring patients to receive “designated health services” payable by Medicare or Medicaid from entities with which the physician or an immediate family member has a financial relationship, unless an exception applies.

The federal entities overseeing the enforcement of Stark Law include: the Department of Justice (DOJ), the Centers for Medicare and Medicaid Services(CMS) and the Department of Health and Human Services Office of Inspector General (HHS OIG). At its core, it is designed to remove any potential conflict of interest that could cloud medical judgment. By ensuring that healthcare decisions are solely guided by patients’ best interests, devoid of any financial incentives for physicians, it upholds the ethical standards and transparency crucial to healthcare services.

Under the Stark Law, any HCP, healthcare system or hospital covered by the statute faces strict liability for violations. They can be found at fault for breaches, irrespective of intent or awareness. In other words, merely demonstrating an improper referral suffices to establish liability, regardless of whether the HCP was aware of potential financial or familial conflicts.

A Stark Law violation may require the HCP to refund all payments collected for improper referrals and face exclusion from all federal healthcare programs. Civil monetary penalties apply to each claim submitted in violation of the law, plus an assessment of up to three times the amount claimed, with a separate penalty for each circumvention scheme. HHS adjusts the amounts for inflation each January.

Designated Health Services Covered Under Stark Law

Stark Law Exceptions

Stark Law lists exceptions that permit a referral despite a financial relationship, provided every condition of the exception is met. The ones Life Sciences and provider organizations meet most often:

Stark Law and the Anti-Kickback Statute

Stark Law is a civil, strict liability statute limited to physician referrals for designated health services. The Anti-Kickback Statute is a criminal statute that covers anyone, requires intent and applies to any item or service payable by a federal healthcare program. The same arrangement can violate both, so compliance programs track them together.

What Healthcare Organizations Need to Know

There is an exception in Stark Law which allows DHS entities to provide non-monetary compensation to Healthcare Professionals (HCPs) up to an aggregate amount each year (adjusted annually for inflation).

For calendar year 2026, if the aggregate amount goes above $535, the DHS provider will face penalties for violating Stark Law including but not limited to civil penalties per violation, exclusion from Medicare and a denial of refund from Medicare.

2026 Limit	Amount
Non-monetary compensation to a physician	$535 per year
Medical staff incidental benefits	Less than $46 per occurrence
Limited remuneration to a physician	$6,237 per year

CMS adjusts these limits each calendar year. See the CMS CPI-U updates page.

It is up to the DHS provider to track and record non-monetary compensation expenses and any errors or overages are expected to be reported to CMS using the Self-Referral Disclosure Protocol. To learn more about Stark Law regulations, visit the CMS physician self-referral page.