As with too many laws, the conduct prohibited by Stark Law is riddled with terms of art and looping cross references that require specialized legal training or ability to decipher. The prohibition is codified as 42 U.S.C. 1395nn. I will provide a plain language summary and the actual language.

Stark Law in Plain Language

A physician cannot send medicare or medicaid patients who need certain health services to entities in which the physician has a financial interest. Also, the entity receiving the patient cannot bill for the service. However, these rules do not apply if the physician or the entity meets an exception to the rule.

The questions one must ask are as follows:
1. Is the service to the patient a designated health service (DHS)?
2. Was the patient referred to the entity by a physician who has a financial relationship with the entity?

If the answer to these two questions is “yes,” then you have a Stark problem, which leads to the third question:

3. Does an exception to Stark Law Apply?

42 U.S.C. 1395nn (Stark Law)

(a) Prohibition of certain referrals
(1) In general
Except as provided in subsection (b) of this section, if a physician (or an immediate family member of such physician) has a financial relationship with an entity specified in paragraph (2), then—

(A) the physician may not make a referral to the entity for the furnishing of designated health services for which payment otherwise may be made under this subchapter, and
(B) the entity may not present or cause to be presented a claim under this subchapter or bill to any individual, third party payor, or other entity for designated health services furnished pursuant to a referral prohibited under subparagraph (A).

(2) Financial relationship specified
For purposes of this section, a financial relationship of a physician (or an immediate family member of such physician) with an entity specified in this paragraph is—

(A) except as provided in subsections (c) and (d) of this section, an ownership or investment interest in the entity, or
(B) except as provided in subsection (e) of this section, a compensation arrangement (as defined in subsection (h)(1) of this section) between the physician (or an immediate family member of such physician) and the entity.

An ownership or investment interest described in subparagraph (A) may be through equity, debt, or other means and includes an interest in an entity that holds an ownership or investment interest in any entity providing the designated health service.