by Elizabeth E. Hogue, Esq

The Stark law is more than 30 years old! It was enacted in 1989 and took effect on January 1, 1992. As many providers already know, the so-called “Stark law” prohibits physicians from making referrals to providers who render “designated health services” (DHS) if referring physicians have an ownership or investment interest in or compensation arrangement with the provider.

Enforcement is currently extremely aggressive. In 2024, there were 979 qui tam or whistleblower lawsuits with settlements and judgments amounting to a record-breaking $2.92 billion. In the same year, CMS resolved 314 Stark law self-disclosure settlements totaling more than $24.7 million, which is almost twice the previous annual record. An additional 232 disclosures were withdrawn, closed without settlement, or closed without settlement by law enforcement partners of CMS.

• Whistleblowers are more knowledgeable and sophisticated
• The U.S. Department of Justice is more willing to litigate cases
• Court decisions provide new guidance about physician compensation, referral arrangements, and ownership.

• Community Health Network paid a total of $480 million to settle violations related to the Stark law. This settlement was based on a complaint by a whistleblower filed by the former CFO and COO. They complained that doctors were paid more than fair market value (FMV) and received bonuses that were tied to the number of referrals. This case shows that if compensation arrangements are structured based on the volume of referrals, they likely violate the Stark law even if consultants claim that compensation is at fair market value.
• Covenant HealthCare and two physicians paid a combined $69 million to settle civil suits based on contracts that did not meet requirements of any exception to the Stark law. Providers who use medical directors were reminded by this case that physicians who make referrals must be paid at FMV.St. Francis Health paid $36.5 million because it allegedly made payments to physician specialists tied to the volume or value of referrals.
• Massachusetts Eye and Ear paid more than $5.7 million based on compensation paid to physicians that violated the Stark law. Physicians were paid a percentage of operating margins from facility fees. These fees were, in turn, distributed as bonuses to employed physicians based on services performed and hours worked. Returning revenue back to physicians through bonus structures even if treated as compensation based on productivity is clearly a “non-starter.”
• Erlanger Health System is currently defending itself in two lawsuits that claim it compensated employed physicians in violation of Stark. In response to these suits, Erlanger says that physician compensation is based on FMV as determined by outside consultants, but cases described above call this conclusion into question.

Many trade associations and providers have called for changes to the Stark law or even doing away with it altogether. As the above cases demonstrate, however, Stark is alive and well!

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Elizabeth Hogue is an attorney in private practice with extensive experience in health care. She represents clients across the U.S., including professional associations, managed care providers, hospitals, long-term care facilities, home health agencies, durable medical equipment companies, and hospices.

©2026 Elizabeth E. Hogue, Esq. All rights reserved.
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