October 3, 2023

Obligate Law

Professional Law Makers

A Physician and Hospital Guide to Complying With Federal Stark and Anti-Kickback Laws

4 min read


This article deals with the federal “Stark” Act and the federal “Anti-Kickback” law. This article uses the legislation and court cases to summarize the two Acts. This particular article focuses on a physician’s potential liability under these Acts. The article is designed to provide information to physicians and hospitals on how to comply with these laws in the context of patient referral. This article is derived only from original public sources, in particular the relevant caselaw and legislation.

Federal “Stark” Act

The federal Stark Act concerns only physicians and only kick-backs that a physician or family member of the physician receives from referring Medicare and Medicaid patients to laboratories in which the physician or family of the physician has a financial interest. 42 U.S.C. 1395nn. The Stark Act was later amended to also prohibit physician referrals to other health care enterprises where the physician might have a financial interest. 42 U.S.C. 1395nn(b)(1). The Stark Act is a strict liability statute. Id.

The Stark Act expressly only applies to physicians and does not apply to medical equipment providers, knowledge centers, or marketing services or any other kind of entity. Thus such services cannot be liable under the Stark Act and the Stark Act is inapplicable to the issue involved here. Id.

Federal Anti-Kickback Statute

However, an entity may be liable under the federal Anti-Kickback statute for certain acts, enumerated below. The federal Anti-Kickback was designed to correct the improper awarding of subcontracts and also the corruption of officers, employees or agents of prime contractors who are in some manner participating in the awarding of subcontracts involving the use of government funds. 41 U.S.C. §§ 51,52,54; Howard v. U.S., 345 F.2d 126 (1st Cir. 1965.) The Anti-Kickback statute more broadly applies to financial relationships with any entity that is a source of patient referrals to the other party to the financial relationship. Id. The Anti-Kickback statute extends to “recommending” as well as referring, however no definition of the word “referring” is provided in the statute. Id.

Furthermore, a key distinction between the federal Stark and Anti-Kickback statutes is that where the Stark Act is a strict liability statute, the Anti-Kickback statute requires proof of unlawful intent. Id.

Under the Anti-Kickback statute, it is illegal to knowingly and willfully solicit or receive any remuneration “in return for referring an individual to a person for the furnishing of any item or service for which payment may be made in whole or in part under a federal health care program. 42 U.S.C. § 1320a-7b(b)(1)(A.)

Cases Under the Anti-Kickback Statute

The caselaw is consistent that the Anti-Kickback statute regulates only referrals where federal funds are involved, such as Medicare and Medicaid. U.S. v. Cancer Treatment Centers of American, Not Reported in F.Supp.2d, 2005 WL 2035567 (N.D. Ill.); U.S. ex rel. Porales v. St. Margaret’s Hosp., 243 F.Supp. 843, 848 (C.D. Ill. 2003.) Thus, if no federally funded program is involved, the Anti-Kickback statute does not come into play in this scenario. Id.

Requisite Intent and Requisite Federal Contracts for Liability Under Anti-Kickback Statute

If any federally funded programs such as Medicare or Medicaid are involved in the scenario, the Anti-Kickback statute applies, though the involvement of a federally funded program does not necessarily result in violation of the Anti-Kickback statute. Id. The Anti-Kickback statute focuses on the circumstances surrounding the referrals themselves. Id. The analysis is whether the arrangement is designed to improperly obtain or reward favorable treatment for the broker by means of “kickback.” Id.

The term “kickback” has been defined by one court in an Anti-Kickback case to situations involving a percentage of a payment paid to an entity for granting assistance, by one in a position to open up or control a source of income and is not limited to the return of funds to an earlier possessor. U.S. v. Hancock, 604 F.2d 999 (7th Cir. Ind. 1979.)

However, the Anti-Kickback statute does not prohibit the making or receiving of “kickback” payments, except in connection with contracts with the federal government on a cost-plus-a-fixed-fee or other cost reimbursable basis. Payments made in connection with a nonfederal cost-plus-a-fixed-fee contract are not prohibited by the statute. U.S. v. Webber, 270 F.Supp. 286 (D.Del. 1967.)

Thus, if the arrangement at issue does not involve contracts with the federal government on a cost-reimbursable basis, the Anti-Kickback statute does not apply. Id.

Further, the statute does not prohibit kickback payments in connection with either a nonfederal contract or a federal fixed-fee contract. 41 U.S.C. § 51; U.S. v. Dobar, 223 F.Supp. 8 (M.D. Fla. 1963.) Thus, if the arrangement at issue only involves federal fixed-fee contracts with the federal government, it is not prohibited by the Anti-Kickback statute. Id.

Where there is no showing of intent or purpose to violate the Anti-Kickback statute, there is no violation of the Anti-Kickback statute. McDonnell v. Cardiothoracic & Vascular Surgical Associates, Inc., Not Reported in F.Supp.2d, 2004 WL 3733402 (S.D. Ohio 2004.) Therefore, if there is no proof of intent to violate the Anti-Kickback statute, there is no criminal violation under the statute.


As noted above, if there is no payment to one in a position to “open up or control a source of income,” there is no violation of the Anti-Kickback statute. Id. Thus, if the scenario at issue does not involve a payment to “one in a position to open up or control a source of income,” there is no violation of the statute. Id. There is also no violation if no federal funding is involved. Id. And there is no violation absent a finding of intent to violate the statute. Id.

This article does not copy or paste any text from any private sources. All sources are public court cases or public legislation.

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