FAQs About Stark Law Violations: Penalties, Exceptions, and Reporting

The Stark Law, officially called the Physician Self-Referral Law, is a federal rule that shapes how healthcare providers handle referrals and financial relationships. It was created to prevent arrangements that might put financial interests ahead of patient care. In Texas, providers often have questions about what the law covers and how to stay aligned with it.

Sorting through the details can be a challenge – especially when ownership, compensation, and referral patterns overlap. That’s why we’ve outlined answers to 12 frequently asked questions about Stark Law violations. This guide is here to support Texas healthcare professionals in making informed decisions and avoiding legal trouble.

Answering 9 FAQs on the Consequences of 

Stark Law Violations

Due to the complexity of the law and the various scenarios that can include safe harbor stipulations, understanding the violations can be a challenge. Here are nine frequently asked questions related to Stark Law violations: 

1. What Happens If You Violate The Stark Law?

The penalties can be steep. Providers may face civil fines, lose the ability to bill Medicare or Medicaid, or be dropped from those programs entirely. In some cases, violations also lead to criminal charges. The more serious the violation, the bigger the fallout. These consequences can affect both day-to-day operations and long-term reputation.

2. How can I determine if a transaction or arrangement violates the Stark Law?

A transaction likely violates the Stark Law if all five of these conditions are true:

1. A physician is the one making the referral.

2. The referral is for designated health services.

3. Medicare pays for those services.

4. The referral is made to a specific entity (such as a clinic, lab, or facility).

5. The physician – or an immediate family member – has a financial relationship with that entity.

If all these apply, the arrangement may be noncompliant and should be reviewed closely.

3. What are the financial penalties for Stark Law violations?

Civil Stark Law penalties can reach $15,000 per claim – and in some cases, up to $100,000 for each arrangement involving improper referrals. On top of that, providers may be required to repay up to three times the amount Medicare paid out.

Violations can also trigger the False Claims Act, which carries even more weight. That means treble damages and fines ranging from $5,500 to $11,000 for each false claim.

4. What are some common examples of Stark Law violations?

Stark Law violations tend to follow familiar patterns. Here are a few of the most common:

• Self-referral: A physician sends patients to a business they have a financial stake in – like a lab, imaging center, or pharmacy. Without a valid exception, this is a direct violation.

• Improper financial relationships: Referrals to entities with which a physician has a financial tie are only allowed under strict conditions. Kickbacks or referral fees, for example, don’t qualify and are prohibited.

• Compensation that doesn’t match fair market value: If a physician is paid more than their services are worth – or if the amount is based on how many referrals they make – it could be flagged as a violation.

• Indirect compensation: Even if the payment comes from a third party, it may still fall under the Stark Law if it’s connected to patient referrals.

• Missing or incomplete documentation: Agreements must be properly written and retained. If documentation around a financial relationship is missing or vague, it could trigger compliance issues. 

5. Are there any exceptions or safe harbors to the Stark Law?

Yes. The Stark Law includes several exceptions, commonly called “safe harbors”, that allow certain financial relationships between referring providers and healthcare entities.

To fall under a safe harbor, payments from the referring entity must meet all of the following conditions:

1. The amount is set in advance.

2. It reflects fair market value.

3. It isn’t tied to the volume or value of referrals.

There are also safe harbors for specific situations, like lease agreements and physician recruitment. If an arrangement meets the outlined requirements, it won’t be treated as a violation. 

6. Can individuals be held personally liable for Stark Law violations?

Yes. The Stark Law doesn’t just apply to organizations. Individual physicians, including those who are self-employed, can be held accountable for making prohibited referrals or submitting false claims.

The consequences go beyond fines and repayment. Violations can also harm a provider’s reputation and limit future career opportunities. Every provider should understand how the law applies to their own financial arrangements.

7. What is the process for reporting Stark Law violations?

Reporting a potential Stark Law violation involves a few key steps. These help protect your credibility and support a proper review:

• Gather documentation. Collect emails, contracts, statements, or anything that supports the concern.

• Speak with legal counsel. A healthcare attorney can explain what should be reported and how to move forward.

• Use internal reporting channels. If you’re part of the organization, notify your compliance officer or follow your employer’s reporting procedures.

  • • Consider anonymous reporting. Many organizations and agencies offer anonymous options if you’re concerned about being identified.

    • Ask about confidentiality. If you identify yourself, confirm that the agency or organization will protect your name as much as the law allows.

• Report externally if needed. You can contact the Office of Inspector General (OIG) or Centers for Medicare & Medicaid Services (CMS) if internal steps aren’t appropriate.

• Be specific. Share facts, dates, and any supporting materials that help clarify the issue.

• Cooperate if asked. If an investigation begins, you may be asked to provide more details or participate in interviews.
  
  

8. What steps can healthcare organizations take to ensure compliance with the Stark Law?

Healthcare organizations should keep their referral and compensation practices within Stark Law boundaries. The following steps can help reduce risk and support long-term compliance:

• Conduct regular reviews. Run periodic audits to check for potential violations. Focus on referral patterns, financial relationships, and service agreements.

• Train your team. Physicians and staff should know what the law allows and doesn’t. Training should include topics like referral restrictions, documentation standards, and safe harbor rules.

• Put clear policies in place. Every organization should have written policies covering referral practices, compensation structures, and documentation procedures. Review and update them as regulations change.

• Get legal input. Legal counsel with healthcare experience can help review contracts, clarify requirements, and flag risky arrangements before they become problematic.

• Monitor relationships. Use a system to track payments, agreements, and referrals. Address issues as they arise and keep a written record of any corrective actions.

• Keep your documentation in order. Maintain written agreements and records that show how financial relationships are structured and why they meet legal standards.

• Stay informed. Regulatory updates happen. Use reliable legal sources, industry publications, and trusted advisors to stay ahead of any changes.

Even with these precautions, it's a good idea to consult a healthcare attorney when questions arise. Every organization’s risk profile is different.

9. What is the intent requirement for a Stark Law violation?

The Stark Law is a strict liability statute, meaning that a violation can occur even without any criminal intent. This means that medical organizations must be aware of the requirements regardless of the intentions of their employees or contractors. The intent requirement comes into play when interpreting specific regulations and penalizing violations – if an organization has not taken sufficient steps to address potential violations, they may still face significant penalties.

Organizations must have adequate policies and procedures in place to ensure compliance with the Stark Law. Regular review and training should also be conducted to ensure that all personnel understand the organization’s expectations and obligations with respect to Stark Law compliance. Organizations should keep detailed records of their compliance efforts in order to demonstrate that steps were taken to avoid violating the law, even if it was not possible to prevent all violations from occurring.

10. How Do Recent Amendments Or changes in healthcare laws impact the interpretation and enforcement of the stark law?

CMS continues to refine how the Stark Law is applied, especially in areas that impact modern healthcare delivery. These changes are designed to ease administrative pressure and support care models focusing more on collaboration and shared outcomes.

In 2024, CMS updated the list of services covered under the law. This includes changes related to drug testing services, which now affect practices in behavioral health and pain management. At the same time, regulators are paying closer attention to financial relationships and referral patterns. That makes it even more important for providers to keep policies current and review compensation structures regularly.

11. What Are The Long-Term Impacts Of A Stark Law Violation?

A Stark Law violation can leave lasting damage, both financially and professionally.

On the financial side, providers may face large fines, repayment demands, and removal from federal programs. These penalties can disrupt operations and lead to lost revenue over time.

Reputation is also at risk. A violation may cause patients, peers, and partners to question a provider’s judgment or integrity. That kind of mistrust can limit future opportunities and weaken long-standing professional relationships.

12. How Do Stark Law Violations Intersect With Other Healthcare Laws, Such As The Anti-Kickback Statute Or False Claims Act?

Stark Law violations often overlap with other healthcare laws, especially the Anti-Kickback Statute (AKS) and the False Claims Act (FCA). When that happens, providers can face multiple layers of enforcement.

If a provider submits Medicare or Medicaid claims tied to arrangements that break Stark or AKS rules, those claims may be treated as false under the FCA. That can lead to steep financial penalties, including fines for each claim and repayment at three times the original amount.

Unlike Stark, the AKS and FCA require intent. That’s why it’s important to keep clear documentation and stay ahead of compliance concerns. If a provider can show that steps were taken to follow the law, that record may help during a review.

CMS and the OIG offer self-reporting options for potential violations. Reporting early shows transparency and can lead to a more measured response.

Stark Law Violations: What Healthcare Providers Should Remember

Stark Law violations can carry lasting consequences, but staying informed helps reduce the risk. For providers across Texas, it’s worth reviewing referral arrangements, financial ties, and how those relationships are documented.

When something feels unclear, take the time to ask questions and revisit the details. A consistent approach to compliance supports both your practice and your reputation over time.

Ready to Put Compliance into Practice?

If you’re building a medical practice in Texas, this free guide walks you through the steps with clarity and confidence.

This article was published in June 2024 and was recently updated to reflect current industry trends.