Anti-kickback & Stark Compliance

Anti-kickback & Stark Compliance Information

AAFP's journal Family Practice Management has answered many questions about anti-kickback laws and Stark regulation. We have compiled a list of frequently asked questions based on FPM's information.

What is the anti-kickback rule?

The anti-kickback statute makes it illegal for providers (including physicians) to knowingly and willfully accept bribes or other forms of remuneration in return for generating Medicare, Medicaid or other federal health care program business.

A physician cannot offer anything of value to induce federal health care program business. The anti-kickback statute has been revised to allow exceptions or safe harbors.

Safe harbors include:

  • Investments in large publicly-held health care companies
  • Investments in small health care joint ventures
  • Space rental
  • Equipment rental
  • Personal services and management contracts
  • Sales of retiring physicians' practices to other physicians
  • Referral services
  • Warranties
  • Discounts
  • Employee compensation
  • Group purchasing organizations
  • Waivers of Medicare Part A inpatient cost-sharing amount
  • Increased coverage
  • Reduced cost-sharing amounts or reduced premium amounts offered by health plans to beneficiaries
  • Price reductions offered to health plans by providers
  • Investments in ambulatory surgical centers (ASCs)
  • Joint ventures in underserved areas
  • Practitioner recruitment in underserved areas
  • Sales of physician practices to hospitals in underserved areas
  • Subsidies for obstetrical malpractice insurance in underserved areas
  • Investments in group practices
  • Specialty referral arrangements between providers
  • Cooperative hospital services organizations

What is Stark II?

Stark II is Phase II of the law that prohibits physician self-referrals.

The law applies to any physician who provides care to Medicare, Medicaid or other federal health program recipients and says that the physician cannot refer the patient for certain designated health services to any entity with which the physician has a financial interest. That is, unless one of Stark's exceptions apply.

What is Stark III?

Stark III is actually Stark II, Phase III of the physician self-referral prohibition. This regulation provides further clarifications and modifications to Stark II, Phase II, especially regarding physicians in group practice and the relationships between physicians and hospitals.

The Centers for Medicare and Medicaid Services provided a partial listing of Phase III changes in the final rule published in the Federal Register of September 5, 2007(

Notable Changes in Stark II, Phase III

  • Eliminates the safe harbor proposed in Phase II within the fair market value definition for physician compensation;
  • Considers a physician to "stand in the shoes'' of a physician organization of which he or she is a member;
  • Clarifies that an independent contractor physician is a "physician in a group practice" when under a contractual arrangement directly with the group practice and is performing services in the group practice's facilities;
  • Permits group practices to impose certain practice restrictions on recruited physicians;
  • Clarifies that group practices can determine productivity bonuses by directly taking into account the volume and value of items and services that are provided "incident to'' the physicians' professional services, in certain circumstances;
  • Adds a 45-minute transportation time test as an alternative to the 25-mile rule to the intra-family rural referrals exception;
  • Adds a holdover provision in the exception for personal service arrangements;
  • Clarifies that a "rural area," a location not included in the Metropolitan Statistical Areas (MSA), may be a micropolitan area. (See the MSA listing at the Office of Management and Budget( to determine MSA status.)
  • Expands the geographic area into which a rural hospital may recruit a physician;
  • Permits a more generous income guarantee under certain circumstances in the case of a physician who is recruited to replace a deceased, retiring or relocating physician;
  • Revises the nonmonetary compensation exception to allow physicians to repay certain excess nonmonetary compensation within the same calendar year to preserve compliance;
  • Allows an entity with a formal medical staff to provide one local medical staff appreciation event per year;
  • Clarifies that a hospital may list a physician's name on it's web site or in advertisements as a medical staff incidental benefit but physician payments for referral services must be within both an exception and an anti-kickback safe harbor;
  • Adds a written certification option as an alternative to the requirement for a bona fide written offer under the exception for retention payments in underserved areas.
  • Expands the exception for retention payments in underserved areas to permit retention payments to be made in the case of a physician who certifies that he or she has a bona fide opportunity for future employment and the arrangement satisfies all other conditions of the exception.