Stark Law and PA Owners

Kris Pyles-Sweet, DMSc, PA-C

How the federal physician self-referral law touches a PA-owned practice.

The Stark law is a federal physician self-referral statute, not a prohibition on PA practice ownership.¹ Stark can affect a PA-owned practice when a physician with a financial relationship refers Medicare patients for certain payable services.¹

What Stark Prohibits

Stark prohibits a physician from referring Medicare patients for designated health services to an entity with which the physician, or an immediate family member, has a financial relationship, unless an exception applies.¹ The entity also may not bill Medicare for services resulting from a prohibited referral.¹ Financial relationships include ownership interests and compensation arrangements, not merely payments for referrals.² Designated health services include clinical laboratory services, imaging, physical therapy, durable medical equipment, and outpatient prescription drugs, among others.³

Unlike the Anti-Kickback Statute, Stark is a strict liability statute: intent is not an element, so a well-meaning arrangement can still be noncompliant.²

Why PA Owners Should Care

PAs are not physicians under the federal definition.⁴ A PA's independently initiated order does not become a physician referral merely because the PA owns the practice; however, services furnished under a physician-established plan of care may constitute a physician referral.³ Two situations deserve particular attention:

Paying a supervising or collaborating physician. If the practice pays a physician and that physician orders Medicare-covered clinical laboratory services the practice performs and bills, the compensation arrangement requires an applicable Stark exception.⁵

Physician partners. A physician's ownership interest creates a financial relationship, so the physician's referrals for Medicare-covered designated health services must qualify for an exception.³

In-Office Ancillary Services

Sharing an office with a physician is not enough to fit the in-office ancillary services exception.⁶ The furnishing, location, and billing requirements must all be satisfied.⁶

Protecting the Practice

For physician service agreements, the personal services exception requires a signed writing that specifies the services, a term of at least one year, aggregate services no more than reasonable and necessary for the arrangement's legitimate business purposes, compensation set in advance at fair market value, and compensation not determined in a manner that takes into account the volume or value of referrals.⁵ Fair market value alone does not satisfy an exception with additional conditions.⁵

Stark compliance does not resolve Anti-Kickback Statute exposure, which can apply when PAs knowingly and willfully pay or receive remuneration to induce federal-program business.²

The Takeaway

Ask counsel to assess whether each physician relationship involves physician referrals for Medicare- designated health services and, when Stark applies, document compliance with an applicable exception before you launch.

References

1.      Centers for Medicare & Medicaid Services. Modernizing and clarifying the physician self-referral regulations final rule (CMS-1720-F). Published November 20, 2020. Accessed October 21, 2026. https://www.cms.gov/newsroom/fact-sheets/modernizing-and-clarifying-physician-self-referral-regulations-final-rule-cms-1720-f

2.     US Dept of Health and Human Services Office of Inspector General. Fraud & abuse laws. Published September 1, 2021. Accessed October 21, 2026. https://oig.hhs.gov/compliance/physician-education/fraud-abuse-laws/

3.     42 CFR § 411.351. Accessed October 21, 2026. https://www.law.cornell.edu/cfr/text/42/411.351

4.     42 USC § 1395x. Accessed October 21, 2026. https://www.law.cornell.edu/uscode/text/42/1395x

5.     42 CFR § 411.357. Accessed October 21, 2026. https://www.law.cornell.edu/cfr/text/42/411.357

6.     42 CFR § 411.355. Accessed October 21, 2026. https://www.law.cornell.edu/cfr/text/42/411.355