Stark Law & Anti-Kickback Statute: What They Mean for Vendor Contracts

Two laws, one goal

The Stark Law and the Anti-Kickback Statute (AKS) are the two federal fraud-and-abuse laws that most often shape how healthcare organizations contract with physicians, referral sources, and certain vendors. Both exist to ensure that medical decisions are driven by patient need rather than financial incentives.

They overlap but are not the same. The Stark Law is a civil, largely strict-liability statute focused narrowly on physician self-referral. The AKS is a broader criminal statute that reaches a wide range of arrangements. An arrangement can implicate one, both, or neither.

This article is general information, not legal advice. Fraud-and-abuse law is complex and fact-specific; consult qualified healthcare counsel for any actual arrangement.

Stark Law in plain English

The Stark Law — the physician self-referral law — generally prohibits a physician from referring patients for certain 'designated health services' payable by Medicare to an entity with which the physician (or an immediate family member) has a financial relationship, unless an exception applies. It also bars the entity from billing for those referred services.

Two features make Stark demanding. First, it is generally a strict-liability statute for its civil penalties: intent to violate is not required, so a technical foot-fault in an arrangement can be a violation. Second, compliance runs through a set of regulatory exceptions, many of which require that arrangements be in writing, signed, set in advance, and consistent with fair market value.

The Anti-Kickback Statute in plain English

The Anti-Kickback Statute prohibits knowingly and willfully offering, paying, soliciting, or receiving any remuneration — that is, anything of value — to induce or reward referrals of items or services reimbursable by a federal healthcare program. Unlike Stark, the AKS is a criminal statute and requires a degree of intent, though courts have interpreted that intent standard broadly.

Because the AKS is broad, the government has published 'safe harbors' — categories of arrangements that, if every condition is met, are protected. Safe harbors are voluntary; failing to fit one does not automatically mean a violation, but fitting one provides protection. Many safe harbors, like Stark exceptions, hinge on written agreements, fair market value, and terms set in advance.

Why fair market value is everywhere

If one concept ties Stark and the AKS together for contracting purposes, it is fair market value (FMV). Compensation that exceeds FMV — or that varies with the volume or value of referrals — is a classic red flag under both laws.

In practice, this means payments to physicians and referral sources should be:

• •Consistent with fair market value for the actual services provided.
• •Commercially reasonable even absent any referrals between the parties.
• •Set in advance, not adjusted after the fact based on referral volume.
• •Documented with the basis for the FMV determination (for example, a valuation or benchmarking analysis).

Contract safeguards that reduce risk

Much of fraud-and-abuse compliance is a contracting discipline. The agreement itself is often the first piece of evidence a regulator examines, so the way it is written matters. Practical safeguards include:

• •Put it in writing and get it signed before services begin — many exceptions and safe harbors require a signed, written agreement.
• •Specify the services, the term (often a minimum of one year for relevant exceptions), and the compensation methodology clearly.
• •Tie compensation to FMV and retain the supporting valuation; avoid any formula that flexes with referrals.
• •Confirm the arrangement is commercially reasonable on its own terms.
• •Track the agreement so it does not lapse and quietly continue without a current signature — an expired-but-still-operating arrangement is a common Stark pitfall.
• •Keep all of this in an organized, auditable record rather than scattered across drives and inboxes.

How contract technology helps

No software makes an arrangement compliant — that judgment belongs to counsel and compliance. But contract technology materially reduces the operational failures that turn defensible arrangements into violations: missing signatures, lapsed terms, undocumented FMV, and arrangements that drift out of their written scope.

A healthcare CLM can flag physician and referral-source agreements for compliance review, ensure they are signed before they take effect, attach FMV documentation to the contract record, and alert owners before a term expires. It can route the right clauses to the right reviewer instead of asking a generalist to spot a Stark issue in a 60-page document.

If you contract with physicians or referral sources, the highest-value first step is an inventory: confirm every such arrangement is currently signed, within term, and backed by FMV documentation. VeloContract is built to keep that inventory continuous and audit-ready — see the platform overview, and treat this article as general information rather than legal advice.