The physician self-referral law—commonly referred to as the Stark law—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. See 42 U.S.C. § 1395nn.

Financial relationships include ownership or investment interests and compensation arrangements. For example, if a physician invests in an imaging center, the Stark law requires the resulting financial relationship to fit within an exception or the physician may not refer patients to the facility and the entity may not bill for the referred imaging services.

Designated health services are:

• clinical laboratory services;

• physical therapy, occupational therapy, and outpatient speech-language pathology services;

• radiology and certain other imaging services;

• radiation therapy services and supplies;

• durable medical equipment (DME) and supplies;

• parenteral and enteral nutrients, equipment, and supplies;

• prosthetics, orthotics, and prosthetic devices and supplies;

• home health services;

• outpatient prescription drugs; and

• inpatient and outpatient hospital services.

The Stark law is a strict liability statute, which means proof of specific intent to violate the law is not required. The Stark law prohibits the submission, or causing the submission, of claims in violation of the law's restrictions on referrals. Penalties for physicians who violate the Stark law include fines as well as exclusion from participation in the federal health care programs.

In California, the Stark Law is a federal regulation that governs physician referrals for certain designated health services that are payable by Medicare or Medicaid. Physicians are prohibited from referring patients to entities with which they or their immediate family members have a financial relationship, unless the arrangement fits within one of the law's exceptions. Financial relationships can be through ownership, investment, or compensation arrangements. The Stark Law covers a range of services including clinical laboratory services, various therapy services, radiology and imaging, radiation therapy, durable medical equipment, and more. It is a strict liability statute, meaning that intent to violate the law is not required for penalties to apply. Violations can result in significant fines and exclusion from federal health care programs. California physicians must ensure that their referral practices comply with the Stark Law to avoid these severe penalties.