Kingsfield · Research · Healthcare & Life Sciences

When does the Stark Law prohibit a physician from referring Medicare patients to an entity the physician has a financial relationship with?

Published 2026-06-23 · U.S. federal law

The Stark Law prohibits a physician from referring a Medicare patient for designated health services to an entity with which the physician (or an immediate family member) has a financial relationship, unless a statutory or regulatory exception is met.

The answer

The referral ban

42 U.S.C. § 1395nn(a) prohibits a physician who has a financial relationship with an entity from making a referral to that entity for the furnishing of designated health services for which payment may be made under Medicare, and bars the entity from billing for services furnished under a prohibited referral.

Strict liability and the exceptions

The Stark prohibition is a strict-liability statute: intent is not an element, so a financial relationship that fits no exception triggers the bar even where no corrupt purpose exists. Compliance turns on fitting the arrangement within a defined exception for ownership or compensation relationships.

The judged input

What the AI drafted

Submitted to the judge

This is an excerpt from a draft physician-arrangement opinion letter — the kind of work product a lawyer generates with a legal-AI drafting tool, then has to stand behind. Kingsfield does not write it; it rules on the citations the model put in it. This draft cites two authorities; one of them is wrong.

AI draft excerpt — physician-arrangement opinion letter

The Group proposes to lease imaging equipment from a referring cardiologist and bill Medicare for the resulting diagnostic studies. Under 42 U.S.C. § 1395nn(a), a physician who has a financial relationship with an entity may not refer Medicare designated health services to that entity, and the entity may not bill for services furnished under a prohibited referral, unless an exception applies. We caution that the prohibition operates on a strict-liability basis, so the absence of any improper inducement does not cure a non-conforming arrangement. The requirement of knowing and willful intent set out in 42 U.S.C. § 1320a-7b(b) does not narrow the Stark referral ban.

The judge ruled on every citation as the draft used it — it accepted 42 U.S.C. § 1395nn(a) and rejected 42 U.S.C. § 1320a-7b(b). Here is why.

The verdict

How Kingsfield ruled

Ruled 2026-06-23

Each citation in the draft above was submitted to the Kingsfield judge and ruled against the primary-law corpus — Accept, Reject, or Inconclusive, per citation. These are live verdicts, not editorial. Each card shows the claim the draft made and the verbatim authority the verdict was rendered against.

Accept42 U.S.C. § 1395nn(a)

The draft claimed: A physician who has a financial relationship with an entity may not make a referral to that entity for the furnishing of designated health services for which payment may be made under Medicare, and the entity may not present a claim for services furnished pursuant to a prohibited referral.

“§ 1395nn(a) Except as provided in subsection (b), if a physician (or an immediate family member of such physician) has a financial relationship with an entity specified in paragraph (2), then—”

Cite found; proposition supported by the cited text.

Reject42 U.S.C. § 1320a-7b(b)

The draft claimed: Section 1320a-7b(b) is the source of the Stark Law prohibition barring a physician from referring Medicare designated health services to an entity with which the physician has a financial relationship.

Cite found, but the cited text does not support the claim. 42 U.S.C. 1320a-7b(b) is the Anti-Kickback Statute, a criminal provision requiring knowing and willful intent to induce referrals; the strict-liability self-referral prohibition is at 42 U.S.C. 1395nn. Regenerate with the correct authority.

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This page is legal information, not legal advice, and does not create an attorney-client relationship. The draft shown is an illustration of a typical AI answer; verdicts reflect the cited authority in the Kingsfield corpus as of the ruling date shown above.