Two New York ophthalmology practices’ $2.3 million settlement over outside transcranial doppler testing arrangements is the latest example of a Stark law problem hiding in plain sight: a referral relationship that looks like routine outsourcing but fails the law’s ownership and billing requirements.
That arrangement is only one of several places where physicians and health systems are getting caught off guard. Here are seven Stark law blind spots worth a second look:
1. Outside testing arrangements that skip the ownership test
The Stark law’s in-office ancillary services exception only protects referrals for tests billed by the physician, the group practice or an entity the physician or group wholly owns. Arrangements with third-party testing vendors the practice doesn’t own fall outside that protection, a gap the Justice Department has now used against Fromer Eye Centers and Floral Park Ophthalmology ($2.3 million), Brandon Eye Associates ($1.3 million), Pinellas Eye Care, doing business as Gulfcoast Eye Care ($615,000), and five separate Florida ophthalmology practices, including Clay Eye Holdings (nearly $6 million), over transcranial doppler ultrasound referrals.
2. The in-office ancillary exception’s other trip wires
Ownership isn’t the only requirement practices miss. The exception also demands that services be performed under proper physician supervision, delivered in the group’s office or a centralized location and billed only by the group or a wholly owned entity. Law firm Cranfill Sumner describes this as “a guardrail intended to prevent stand-alone ancillary referral centers.” Practices also have to clear Stark’s “group practice” definition, including the “substantially all” test requiring roughly 75% of patient care services to come from group physicians. Structure alone doesn’t satisfy CMS if the entity functions as a billing pass-through rather than a genuinely integrated practice.
3. Compensation tied to referral volume, even with a consultant’s sign-off
A fair market value opinion from an outside compensation consultant isn’t a safe harbor if the pay itself still tracks referrals. The Justice Department’s $345 million settlement with Community Health Network, the largest Stark-related False Claims Act recovery in department history, centered on compensation that reportedly relied on inaccurate data given to appraisers to justify pay that tracked referral volume. St. Francis Health System paid $36.5 million over orthopedic surgeon compensation tied to the volume or value of referrals, and Covenant HealthCare paid $69 million over medical director contracts that didn’t meet Stark’s requirements regardless of how the arrangements were labeled.
4. Fair market value doesn’t cover Anti-Kickback Statute exposure
Even a compliant Stark arrangement can still violate the Anti-Kickback Statute. The HHS Office of Inspector General’s updated FAQ guidance, flagged by Frier Levitt, states plainly that “fair market value for goods or services does not, by itself, immunize an arrangement from AKS liability,” and that satisfying a Stark law exception does not shield a party from AKS liability. Stark law is strict liability and narrowly focused on designated health service referrals, while the Anti-Kickback Statute is intent-based and reaches any arrangement that rewards or induces referrals, whatever the price.
5. Inherited exposure in practice acquisitions
Buying a practice means buying its Stark risk. Attorney Aaron Hall’s due-diligence checklist warns that “even minimal or indirect equity can implicate Stark law” and that acquirers need to map every ownership layer, scrutinize legacy compensation for referral ties, and review historical referral patterns before closing.
6. Treating the enforcement lull as low risk
Stark law is a strict-liability statute with a six-year lookback period, so a quiet enforcement stretch doesn’t erase exposure that’s already on the books. The most common gaps are inaccurate fair market value assessments, unsigned or missing contracts, and improper financial ties between physicians and the entities they refer to. Mass General Brigham’s handling of Massachusetts Eye and Ear shows how cooperation can limit exposure: after a whistleblower lawsuit prompted a federal investigation into seven physician compensation plans that allegedly ran afoul of the Stark law, the system terminated six of them and settled for $5.7 million.
7. The compensation limits that quietly reset every year
Stark’s dollar thresholds change annually, and missing the update is its own blind spot. Under the 2026 adjustment, the non-monetary compensation cap rose to $535 per physician annually, with a narrow cure if a practice exceeds it by no more than 50% and the physician returns the excess by Dec. 31, 2026, or within 180 days, usable only once every three years per referring physician. The limited remuneration exception climbed to $6,237, up from $6,055 in 2025.
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