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Stark Law and the Anti-Kickback Statute

The two federal laws that govern financial relationships in health care - the strict-liability ban on physician self-referral and the criminal ban on paying for referrals - and why nearly every practice arrangement has to fit an exception or a safe harbour.

Informational only - this is not legal advice. These definitions explain general legal vocabulary in plain English. They are not advice about your situation, reading them creates no attorney-client relationship, and the law differs from state to state and changes over time. For advice you can rely on, speak to a lawyer licensed in your state.

What it means

The Stark law prohibits a physician from referring a Medicare patient for certain designated health services - laboratory, imaging, physical therapy, durable medical equipment, hospital services and others - to an entity with which the physician or an immediate family member has a financial relationship, and prohibits the entity from billing for the referred service, unless the relationship fits one of the statutory or regulatory exceptions. It is a strict-liability statute: intent is irrelevant, a technical failure to meet every element of an exception is a violation, and the consequence is that every claim for the tainted referrals is an overpayment that must be refunded, with civil penalties and possible exclusion on top. Most compliance work is fitting employment, leases, medical directorships, group practice compensation and joint ventures inside an exception and keeping them there.

The Anti-Kickback Statute is broader and criminal. It prohibits knowingly and wilfully offering, paying, soliciting or receiving anything of value to induce or reward referrals of items or services paid for by any federal health care programme. It applies to anyone, not only physicians, and courts have held that it is violated if even one purpose of a payment was to induce referrals. Regulatory safe harbours protect arrangements that meet their conditions - fair market value, set in advance, not tied to volume or value of referrals - and an arrangement outside a safe harbour is not automatically unlawful but is judged on its facts and intent. A claim that includes items or services resulting from a kickback is by statute a false claim.

The two laws overlap and differ: Stark reaches only physicians, designated services and Medicare (with Medicaid consequences), and has no intent element; the kickback statute reaches everyone and every federal programme and requires intent. Both were revised in 2020 to accommodate value-based care arrangements. Enforcement comes through False Claims Act suits by whistleblowers as often as through the government, and providers commonly self-disclose Stark problems through the Medicare self-referral disclosure protocol to limit the exposure.

Where this comes from

The physician self-referral law (Stark), Social Security Act § 1877, 42 U.S.C. § 1395nn, with exceptions and definitions at 42 C.F.R. §§ 411.350-411.389; the Anti-Kickback Statute, Social Security Act § 1128B(b), 42 U.S.C. § 1320a-7b(b), with safe harbours at 42 C.F.R. § 1001.952. The 2020 revisions are at 85 Fed. Reg. 77492 (Stark) and 85 Fed. Reg. 77684 (kickback safe harbours). The one-purpose test is from United States v. Greber, 760 F.2d 68 (3d Cir. 1985); the false-claims link is 42 U.S.C. § 1320a-7b(g).

When people hire a lawyer for this

No physician, practice or facility should sign a lease, employment agreement, medical directorship, management contract or joint venture involving referrals without a health care lawyer confirming which exception or safe harbour it fits and documenting fair market value, because the cost of getting it wrong is measured in refunded claims across years, not in the contract's value. A provider who discovers a problem should get advice before doing anything else: the self-disclosure protocols reward prompt, complete disclosure and punish the alternative.

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Part of the LawyerLand plain-English legal glossary. Definitions are written from primary sources - statutes and court rules - and each entry states the authority it rests on, or says plainly when the doctrine is state law with no national rule.

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