Stark Law · 42 U.S.C. § 1395nn

Stark Law compliance software for physician arrangements

The Physician Self-Referral Law is strict liability — a single missing exception element voids the arrangement, regardless of intent. ArrowISE is the workflow that keeps every Stark element documented, current, and defensible.

How the Stark Law works

The Stark Law (42 U.S.C. § 1395nn) prohibits a physician from referring a Medicare patient for designated health services — clinical laboratory services, imaging, physical and occupational therapy, durable medical equipment, home health, outpatient prescription drugs, and inpatient and outpatient hospital services, among others — to an entity with which the physician, or an immediate family member, has a financial relationship, unless that relationship fits a statutory or regulatory exception.

It is strict liability: liability does not turn on intent. If an arrangement fails to satisfy every element of an applicable exception, the referrals are prohibited and the claims that follow are not payable — a good-faith arrangement missing one element is in the same position as a deliberate one. The exception is all-or-nothing.

Exceptions are element-by-element. The personal services arrangements exception (42 C.F.R. § 411.357(d)), for instance, requires a written agreement signed by the parties; compensation set in advance, consistent with fair market value, and not determined in a manner that takes into account the volume or value of referrals; commercial reasonableness even if no referrals were made; and a term of at least one year. The 2021 CMS final rule clarified that fair market value, commercial reasonableness, and the volume-or-value standard are separate and distinct concepts — an arrangement has to satisfy each on its own terms.

Where Stark arrangements break

The failures are rarely exotic. They cluster in a few places:

• Compensation that moves with referrals. Wage-per-wRVU rates, collections splits, and productivity bonuses can drift into the volume-or-value zone without a single line that names referrals. The judgment against Tuomey Healthcare — roughly $237 million — turned on part-time employment contracts whose compensation tracked the value of referrals.
• Stale or missing fair market value. An exception requires FMV, and an opinion that was current at signing can lapse over a multi-year term while compensation stays fixed.
• A missing writing or signature. An unwritten or unsigned arrangement fails the writing requirement no matter how defensible the economics are.
• Thinly documented commercial reasonableness. Programs satisfy the visible elements — a signed agreement, an FMV figure — and leave commercial reasonableness or the volume-or-value condition under-supported. Community Health Network's $345 million settlement, the largest Stark-based False Claims Act resolution in DOJ history, alleged physician compensation above fair market value tied to referrals.

What ArrowISE does for Stark

ArrowISE is purpose-built for physician-arrangement compliance. For Stark specifically, it keeps the exception intact and the record defensible:

• Exception element completeness. Each arrangement is scored against the elements of the applicable Stark exception, with the missing or unlocatable elements surfaced — the signed writing, the term, the set-in-advance compensation, the volume-or-value condition.
• FMV currency. ArrowISE tracks the age of each fair market value opinion across a contract's life and flags a lapse before it becomes exposure, rather than after an audit finds it.
• Defensibility Index℠. A deterministic, published 0–100 score of how well an arrangement's Stark posture would hold up under review, with the sub-scores that drive it — so a compliance officer can see, arrangement by arrangement, where the exposure sits.
• A contemporaneous, tamper-evident record. Elements are captured as the arrangement is built and preserved on a hash-chained audit trail — the contemporaneous documentation an external reviewer distinguishes from a file reconstructed under inquiry.

Frequently asked questions

Is the Stark Law strict liability?

Yes. Liability does not require intent. If an arrangement fails to satisfy every element of an applicable exception, the physician's referrals for designated health services are prohibited and the resulting claims are not payable — regardless of good faith.

How does ArrowISE detect a Stark exception gap?

It scores each arrangement against the elements of the applicable exception (for example, 42 C.F.R. § 411.357(d)) and flags any element that is missing or not locatable — an unsigned agreement, a lapsed FMV opinion, or compensation that varies with the volume or value of referrals. ArrowISE surfaces the gap; qualified counsel makes the legal determination.

Can a wRVU productivity model violate Stark?

It can, if a component of compensation takes into account the volume or value of referrals for designated health services. The volume-or-value standard is a distinct, behavioral test — how the formula moves, not only how it is described.

Does ArrowISE replace our compliance counsel?

No. ArrowISE is compliance workflow and documentation infrastructure — not legal advice. It keeps Stark elements current and defensibly documented so counsel and compliance officers can decide faster and on better evidence.