> ## Documentation Index
> Fetch the complete documentation index at: https://mso.getlemma.com/llms.txt
> Use this file to discover all available pages before exploring further.

# Stark, AKS, and why comp design is constrained

> Plain-English tour of the Anti-Kickback Statute and the Stark Law, how they touch MSO-PC life, and the state analogues that reach commercial payers.

The **Anti-Kickback Statute (AKS)** is a criminal, intent-based prohibition on paying or receiving anything of value to induce or reward referrals of federally reimbursable items or services. The **Stark Law** is a civil, strict-liability prohibition on physician referrals for designated health services to entities with which the physician has a financial relationship. They are different statutes with different tests, and together they constrain how everyone in an MSO-PC group gets paid.

## The two statutes side by side

|                       | Anti-Kickback Statute                                                     | Stark Law                                                                                |
| --------------------- | ------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------- |
| **Citation**          | 42 U.S.C. § 1320a-7b(b)                                                   | 42 U.S.C. § 1395nn                                                                       |
| **Nature**            | Criminal                                                                  | Civil                                                                                    |
| **Intent required**   | **Yes**, knowing and willful                                              | **No**, strict liability                                                                 |
| **What it prohibits** | Remuneration to induce or reward referrals                                | Physician referrals for designated health services where a financial relationship exists |
| **Who it covers**     | Anyone                                                                    | Physicians (and immediate family members)                                                |
| **Scope**             | Federal health care programs                                              | Medicare (and Medicaid via related provisions)                                           |
| **Protection**        | **Safe harbors**, voluntary; failing to fit isn't automatically illegal   | **Exceptions**, mandatory; you must fit one exactly                                      |
| **Penalties**         | Criminal fines, imprisonment, exclusion, CMPs, False Claims Act liability | Denial of payment, refunds, CMPs, exclusion, FCA liability                               |

The most important structural difference: **AKS safe harbors are voluntary and Stark exceptions are not.** An arrangement that misses an AKS safe harbor is evaluated on its facts and intent. An arrangement that misses a Stark exception is prohibited, full stop, regardless of how benign the intent.

## Anti-Kickback in an MSO-PC group

The statute reaches **remuneration**, anything of value, intended to induce or reward referrals. "One purpose" is enough under the prevailing case law: an arrangement can have legitimate business purposes and still violate AKS if one purpose is to induce referrals.

Where it touches you:

**Friendly-owner compensation.** The medical director stipend must be fair market value for services actually rendered, commercially reasonable, and **not vary with the volume or value of referrals**. A stipend that increases when the practice's volume increases invites the question.

**Clinician compensation.** Productivity-based compensation for a clinician's *own personal services* is generally workable. Compensation tied to *ancillary services the clinician orders* is where problems start.

**Marketing arrangements.** Paying per patient acquired, per referral, or a percentage of revenue from referred patients is the highest-risk arrangement in healthcare marketing. Flat-fee marketing services at FMV are the safer structure.

**The management fee itself.** A fee tied to referral volume is a problem. This is a further reason percentage-of-collections fees attract scrutiny — beyond fee-splitting, a percentage fee can be characterized as remuneration varying with referred business. See [Fee-splitting rules](/concepts/model/fee-splitting).

**Anything free or discounted to a referral source.** Free space, free staff, below-market rent, free EHR access, all remuneration.

### Relevant safe harbors

Safe harbors at 42 C.F.R. § 1001.952 describe arrangements protected from AKS liability. The ones that recur here:

| Safe harbor                                    | Core requirements                                                                                                                             |
| ---------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------- |
| **Personal services and management contracts** | Written, signed, at least one year, specifies services, aggregate compensation set in advance, FMV, not varying with referral volume or value |
| **Employment**                                 | Bona fide employment relationship                                                                                                             |
| **Space and equipment rental**                 | Written, at least one year, set in advance, FMV, commercially reasonable, not varying with referrals                                          |
| **Investment interests**                       | Conditions on ownership structure and returns                                                                                                 |

Note the recurring elements: **written, one year, set in advance, FMV, not varying with referrals.** Design compensation arrangements to that pattern by default and most AKS questions get easier.

## Stark in an MSO-PC group

Stark applies when a **physician** (or an immediate family member) has a **financial relationship** with an entity, and the physician refers Medicare patients to that entity for a **designated health service (DHS)**.

DHS categories include clinical laboratory services, physical therapy, occupational therapy, outpatient speech-language pathology, radiology and certain imaging, radiation therapy, durable medical equipment, parenteral and enteral nutrients, prosthetics and orthotics, home health, outpatient prescription drugs, and inpatient and outpatient hospital services.<sup>1</sup>

Where it touches you:

**In-office ancillary services.** A practice providing lab, imaging, or physical therapy in-house needs the **in-office ancillary services exception**, which has specific requirements about supervision, location, and billing.

**Referrals between your own entities.** This is the multi-profession trap. If your medical PC's physicians refer to your physical therapy PC, a designated health service, and both are managed by the same MSO, you need Stark analysis. "We're all one group" is not the test; the exceptions are. See [Multi-specialty considerations](/concepts/entities/multi-specialty-considerations).

**Physician compensation.** The relevant exceptions have their own requirements around FMV, commercial reasonableness, and not varying with the volume or value of referrals.

**Stark is strict liability.** Intent is irrelevant. An arrangement that fails to satisfy an exception is prohibited even if everyone involved acted in complete good faith and the arrangement is economically sensible. This is why Stark analysis is technical and why it must be done before an arrangement starts, not after.

## The recurring three-part test

Across both statutes and most of their protections, the same three requirements appear:

1. **Fair market value**, the compensation is what an unrelated party would pay
2. **Commercially reasonable**, the arrangement makes business sense even absent referrals
3. **Not varying with the volume or value of referrals**, compensation is not tied to referred business

Design to all three and document all three. That documentation is what an investigation asks for.

## State analogues reach further

Federal AKS and Stark are limited to federal health care programs. **Many states have their own** anti-kickback, self-referral, and fee-splitting laws that apply to **all payers**, including commercial.

Practical consequences:

* An arrangement structured only around federal exposure may still violate state law
* A cash-pay or commercial-only practice is **not** outside this framework
* Multi-state groups face the union of state rules

<Note>
  💉 **Med spas**, often assume that being cash-pay puts them outside kickback law entirely. Federal AKS may not reach a pure cash-pay practice, but **state all-payer statutes frequently do**, and they reach the referral and marketing arrangements med spas rely on. See [Med spas and aesthetics](/concepts/industries/med-spas).
</Note>

## Practical rules

* **Never pay per referral, per patient, or per case** to anyone who can refer
* **Never pay a percentage of revenue** to a referral source
* **Put every compensation arrangement in writing**, for at least a year, with the amount set in advance
* **Document FMV** with a study or a defensible benchmark, and refresh it
* **Document commercial reasonableness**, why the arrangement makes sense on its own
* **Screen everyone against OIG LEIE and SAM.gov**, monthly, documented
* **Have counsel review** any arrangement involving a referral source before it starts

## The False Claims Act connection

The multiplier. A claim submitted in violation of AKS is, by statute, a false claim for FCA purposes.<sup>2</sup> Stark violations similarly convert claims into false claims.

FCA damages are **trebled**, with per-claim civil penalties, and **qui tam** provisions let private relators, commonly former employees, bring suit and share in the recovery. A compensation arrangement that seemed like a small technical problem becomes a very large number when multiplied across every claim submitted while it was in effect. See [Billing compliance basics](/concepts/compliance/billing-compliance-basics).

## Sources

1. 42 U.S.C. § 1395nn (Stark); designated health services defined at 42 C.F.R. § 411.351. CMS, [Physician Self-Referral](https://www.cms.gov/medicare/regulations-guidance/physician-self-referral). AKS at 42 U.S.C. § 1320a-7b(b); safe harbors at 42 C.F.R. § 1001.952. OIG, [Fraud & Abuse Laws](https://oig.hhs.gov/compliance/physician-education/fraud-abuse-laws/).
2. 42 U.S.C. § 1320a-7b(g) (a claim resulting from an AKS violation constitutes a false or fraudulent claim under the False Claims Act, 31 U.S.C. §§ 3729–3733).


## Related topics

- [Structure friendly-owner compensation](/guides/formation/structure-friendly-owner-compensation.md)
- [Set the management fee](/guides/agreements/set-the-management-fee.md)
- [Hire healthcare counsel (and use them well)](/guides/agreements/get-agreements-reviewed.md)
- [Fee-splitting rules, explained](/concepts/model/fee-splitting.md)
- [Billing compliance: the lines you never cross](/concepts/compliance/billing-compliance-basics.md)
- [When to call a lawyer (a triage map)](/concepts/compliance/when-to-call-a-lawyer.md)
- [MSA clause anatomy](/reference/legal/msa-clause-anatomy.md)