Nearly four decades after Rep. Fortney Stark, D-Calif., first moved to bar physicians from referring Medicare patients to labs they had a financial stake in, Stark law is again the subject of bipartisan bills and trade group lobbying.
Here’s what’s driving the latest reform push, what regulators have already changed heading into 2026, and why the law’s history suggests any overhaul will likely be incremental rather than the wholesale repeal some physician groups want.
A fight Congress keeps almost having
The Stark law began narrowly, as a 1989 measure blocking physicians from referring Medicare patients to clinical labs in which they or immediate family members held a financial interest. Congress expanded it in 1993, adding Medicaid and 10 more “designated health services” — physical therapy, radiology, durable medical equipment and home health among them — effective in 1995. It has operated on strict liability from the start: a referral can violate the law even if the physician had no idea it did.
CMS spent much of the next decade writing rules to enforce that expansion, finalizing the Stark II regulations in three phases: Phase I in 2001, Phase II in 2004 and Phase III in 2007. Congress kept legislating around the edges in the meantime. The 2003 Medicare Modernization Act imposed an 18-month moratorium, from December 2003 to June 2005, on physician self-referral to new specialty hospitals, and CMS kept a parallel enrollment freeze on those hospitals in place until August 2006.
None of that touched the law’s biggest carve-out. Physicians who owned a stake in an entire hospital, rather than a wing or service line, could keep referring patients there under the “whole hospital” exception. This provision provoked a boom in physician-owned cardiac, orthopedic and surgical hospitals in the 2000s.
That tension was on display nearly two decades ago, when Stark reclaimed the gavel of the House Ways and Means Committee’s health subcommittee and set off a similar wave of reform speculation. A 2007 analysis published in The American Lawyer Topic pointed to a 1989 Office of Inspector General study finding that Medicare patients referred by physicians with an ownership stake in the treating facility received 45% more clinical lab services and 34% more independent-lab services than other beneficiaries, which was utilization the inspector general estimated cost Medicare $28 million. Lawmakers moved on the whole hospital exception as a result: senators introduced legislation to extend the specialty-hospital moratorium indefinitely, and the House passed a Stark-authored provision that would have eliminated the exception outright. Neither became law.
The exception survived until the Affordable Care Act restricted it in 2010, barring new physician-owned hospitals from opening or expanding after Dec. 31, 2010, while grandfathering existing ones under new disclosure and growth-restriction rules. The Congressional Budget Office estimated the change would cut the federal deficit by $500 million over 10 years.
Reform talk didn’t stop there. In 2016, the Senate Finance Committee’s Republican staff released a report questioning whether Stark’s strict liability standard and compensation rules were compatible with the shift to value-based payment, and the then-chairman held a hearing on options up to full repeal.
Congress didn’t act, but CMS did. In 2020, as part of its “Regulatory Sprint to Coordinated Care,” the agency finalized new permanent exceptions for value-based arrangements and clarified murky terms like “commercially reasonable” and “fair market value,” effective in 2021. It was the biggest rewrite of Stark’s compensation rules since 2007, and it came from rulemaking, not legislation.
The current push: undo the ACA’s restrictions
That 2010 restriction is what’s now back in play. In the current Congress, Reps. Beth Van Duyne, R-Texas, and Henry Cuellar, D-Texas, introduced HR 4002 on June 24, 2025, with bipartisan co-sponsors.
It’s one of at least three bills moving this session under some version of the name Patient Access to Higher Quality Health Care Act — the American Hospital Association’s comment letter references HR 4002, and the American Medical Association points to S 470/HR 977. All three target the same provisions: Sections 6001 and 10601 of the ACA and Section 1106 of the accompanying reconciliation act, which stopped new physician-owned hospitals from opening or expanding after Dec. 31, 2010.
The American Medical Association supports repeal, arguing physician-owned hospitals inject competition into consolidated markets, and citing research that charges at existing physician-owned hospitals for eight common procedures ran about a third lower than nearby traditional hospitals for the same services.
The American Hospital Association opposes it just as forcefully. In formal comments on the House bill, the AHA said the measure would let physician-owners steer their most profitable cases to facilities they own while leaving complex, uncompensated and Medicaid-heavy cases to community hospitals, and that it risks “additional gaming of the Medicare program” through overutilization. The trade group is urging Congress to keep the 2010 ban on new physician-owned hospitals in place.
Physician groups are pushing on the compensation side of the law too. The Medical Group Management Association has called Stark’s compensation-arrangement rules a “major regulatory burden” that’s out of step with value-based payment models, and it’s advocating for a simplified group-practice definition and penalties tied to demonstrable harm rather than technical missteps. The American Urological Association, meanwhile, is defending the in-office ancillary-services exception, the provision that lets group practices bill for imaging and lab work performed in-house, as essential to keeping independent practices able to participate in alternative payment models at all.
What’s already changed, without waiting on Congress
While the legislative fight plays out, CMS has continued adjusting the law’s dollar thresholds on its usual annual schedule. Effective Jan. 1, the non-monetary compensation limit physicians can receive from an entity without triggering Stark rose to $535 a year, and the limited remuneration exception, which allows modest cash compensation without a written contract, rose to $6,237. CMS has also clarified that the “payments by a physician” exception, which lets a physician pay fair market value for items or services without a written agreement, a set term or proof of commercial reasonableness, applies more broadly than many compliance officers assumed.
The enforcement backdrop gives both sides ammunition. The Department of Justice recovered $6.8 billion under the False Claims Act in 2025, with 1,297 new whistleblower lawsuits filed.
What’s next?
Set against that history, the pattern looks familiar: a bill with bipartisan sponsors and a well-funded trade group blocking the biggest ask. Congress has taken the whole hospital exception this far twice before, in 2007 and again ahead of the ACA, and each time got only a partial, prospective restriction. The AHA’s opposition to full repeal now carries the same weight the specialty-hospital industry couldn’t overcome then.
Legal experts say the likelier near-term path is what’s already happening, with CMS adjusting thresholds and exception guidance year over year, while the physician-owned hospital fight stalls again or, at most, yields a narrow carve-out for rural facilities, which draw sympathy from lawmakers on both sides even where broader repeal doesn’t.
That’s consistent with how healthcare attorneys read the odds the last time this exact fight played out. A 2018 analysis from Sheppard, Mullin, Richter & Hampton concluded that only Congress can eliminate the ban outright, since “administrative agencies can relax but not eliminate” it, and predicted that any regulatory workaround “would likely only carve out from the prohibition some small number of specific scenarios” rather than the whole thing, which is roughly what happened when CMS’s 2020 rule delivered a handful of narrow value-based exceptions instead of repeal.
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