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Stark Law Changes: What Your Medical Practice Needs to Know

Posted by 99 MGMT on May 29, 2025 11:30:00 AM

Stark Law

Referral relationships are part of everyday operations in a medical practice – but they can also create unexpected legal risk. If a physician refers patients to a facility where they have or a family member has a financial interest, that referral could violate federal law. The Physician Self-Referral Law, known as Stark Law, was created to prevent these conflicts and reduce unnecessary services billed to Medicare or Medicaid.

Since the law first took effect in the late 1980s, it has been revised to reflect changes in healthcare delivery. The Stark Law changes in 2025 continue that trend, introducing new considerations around how practices manage ownership structures, compensation, and partnerships. Understanding what’s changed – and what hasn’t – can help providers protect their practice from penalties.

Stark Law Changes: A Timeline of Updates

Since its introduction, Stark Law has gone through a series of updates aimed at adapting to the realities of modern healthcare. Each change has influenced how medical practices structure referrals, compensation, and ownership arrangements.

The timeline below outlines the major developments and how they continue to affect providers today:

Year	Stark Law Development
1989	Stark Law is enacted. It initially applies only to physician referrals for clinical laboratory services. The law took effect on January 1, 1992.
1993-1994	Congress expands the law to cover more designated health services (DHS), such as radiology and physical therapy. Certain provisions are also extended to the Medicaid program.
1997	A new amendment allows the Secretary of Health and Human Services to issue written advisory opinions about whether specific referral arrangements comply with the law.
2003	Congress introduces an exception for non-monetary items used solely for electronic prescribing. A temporary moratorium is also placed on referrals to certain specialty hospitals with physician ownership or investment interests.
2010	CMS (Centers for Medicare & Medicaid Services) launches the Medicare Self-Referral Disclosure Protocol (SRDP), giving providers a way to voluntarily report actual or potential violations.
2015	CMS finalizes significant revisions to the Stark Law regulations, including new exceptions for timeshare arrangements and assistance to recruit non-physician practitioners. Clarifications are made to the writing and signature requirements for certain exceptions.
2016	CMS issues further updates to the Stark Law, providing additional guidance on the writing requirements for exceptions to compensation arrangements and clarifying the application of certain exceptions.
2017	CMS finalizes updates to the Stark Law regulations, including technical corrections and clarifications related to unit-based compensation and the annual update to Current Procedural Terminology (CPT)/Healthcare Common Procedure Coding System (HCPCS) codes used to identify certain categories of DHS.
2018	The Bipartisan Budget Act of 2018 codifies certain regulatory changes to the Stark Law, including provisions related to the writing and signature requirements for exceptions.
2019	CMS proposes significant changes to the Stark Law regulations aimed at reducing regulatory burden and facilitating the transition to value-based care models.
2020	CMS issues sweeping regulatory changes to modernize the Stark Law. New exceptions support value-based arrangements, clarify key terms like "fair market value" and "commercial reasonableness," and introduce a new de minimis exception for limited remuneration to physicians.
2021	CMS finalizes regulatory changes aimed at supporting value-based care. These revisions address fair market value, commercial reasonableness, and compensation structures.
2022	Updates to group practice profit-sharing rules prohibit "split pooling" of DHS profits. Profit-sharing must follow a consistent structure within groups or subgroups of at least five physicians.
2023	CMS revises SRDP forms to streamline the disclosure process. The new forms become mandatory on March 1, 2023.
2024	CMS updates the Designated Health Services Code List, including changes related to definitive drug testing and COVID-19 services. That same year, CMS settled 314 Stark Law self-disclosure cases totaling over $12 million, nearly doubling the previous record.
2025	Non-monetary compensation limit raised to $519. CMS issues new guidance on value-based arrangements, indirect compensation, and ownership models to clarify compliance expectations.

Stark Law Violations: What to expect

Once a violation of Stark Law has been identified, several potential consequences may occur. These can include a denial of billing for the facility, payment refunds, and denial of payment.

Further consequences can include fines up to $15,000 for each questionable service rendered, future exclusion from government and state healthcare programs, and penalties of up to $100,000 for attempting to circumvent the regulations outlined in Stark Law.

When Stark Law Doesn't apply: Recognized Exceptions

There are several exceptions to Stark Law that permit physician referrals under defined circumstances. These exceptions aim to account for legitimate business and clinical relationships while limiting financial arrangements that could influence care decisions.

To qualify, the arrangement must meet all requirements tied to that specific exception. These often depend on whether compensation, ownership, or investment interests are involved. Common exceptions include:

Physician-to-physician referrals: Applies when physicians are part of the same group practice. This typically requires a written agreement, outlining services provided over a term of at least one year.
In-office ancillary services: This exception applies to certain services – such as lab tests, imaging, or outpatient prescriptions – provided within a group practice. To qualify, the services must:
- Be performed in the same location where the group practice operates,
- Be supervised by a physician in the group
- And be billed by the group practice itself
Fair market value: This exception applies to written compensation arrangements that are commercially reasonable and consistent with fair market value. The terms must be established in advance and may not vary based on the volume or value of referrals. These agreements must make business sense even if no referrals are made between the parties.
Bona fide employment: Compensation must be set at fair market value and in exchange for identifiable services. Also, the agreement must fit commercially reasonable criteria. Bonuses are permitted under this exception if they are based on services the physician personally provided.
Indirect or non-monetary compensation: Indirect compensation must be established in writing and signed by both parties. It also must be of fair market value. Meanwhile, non-monetary compensation can’t exceed $519 annually and can’t be solicited by the physician.
Space/Equipment leases: There are nine specific requirements that must be met for this exception to be valid. These include the length of the lease term, rental charge criteria, and specifics regarding the leased premises in both size and use.
Rural referrals: This exception allows referrals to entities in rural areas, as defined by CMS. To qualify, the entity must furnish at least 75% of its designated health services to residents of that rural area. This provision helps address access limitations in geographically underserved regions.

What Stark Law Changes Mean for Your Practice

Stark Law changes have continued to reshape how healthcare providers structure referrals, compensation, and ownership arrangements. Understanding these updates – especially those tied to value-based care and fair market value – is important for maintaining compliance and avoiding penalties.

As the law evolves, so does the risk of unintentional violations. Reviewing your existing agreements and referral procedures in light of recent changes can help protect your practice. When in doubt, working with a healthcare compliance professional is a smart way to stay on track.