AMARILLO, TX – Under the federal physician self-referral statute (“Stark”), a physician may not refer a Medicare or Medicaid (“M/M”) patient to a DME supplier if the referring physician (as broadly defined by Stark), or his/her immediate family member, has a financial or ownership relationship with the supplier. There are many exceptions to Stark. If an arrangement meets an exception, Stark is not violated. The following are the Stark exceptions particularly applicable to DME suppliers.

• Space Rental – A DME supplier can rent space to or from a physician if a number of requirements are met, including: (i) written rental agreement with a term of at least one year, (ii) the rent is set one year in advance, (iii) the rent is fair market value (“FMV”), (iv) the rent does not take into account the anticipated number of referrals from the physician, (v) the space rented does not exceed that which is reasonable and necessary for the legitimate business purposes of the lease arrangement, and (vi) the lease arrangement would be commercially reasonable even if no referral were made between the lessee and the lessor.
• Equipment Rental – Same principles as the Space Rental exception.
• Employee – It is acceptable for an employer to pay compensation to a physician who has a bona fide employment relationship with the employer for the provision of services if a number of requirements are met, including the following: (i) the employment is for identifiable services and (ii) the amount of the compensation is FMV and (with a limited exception) is not determined in any manner that takes into account the volume or value of referrals by the referring physician
• Personal Services – A DME supplier can compensate a physician for services if a number of requirements are met, including: (i) written agreement with a term of at least one year, (ii) the aggregate services covered by the arrangement do not exceed those that are reasonable and necessary for the legitimate business purposes of the arrangement, and (iii) the compensation must be FMV and (with a limited exception) is not determined in any manner that takes into account the volume or value of referral or other business generated between the parties.
• Isolated Transaction – If certain conditions are met, an isolated financial transaction will not violate Stark. Examples are (i) a one-time sale of property or a practice or (ii) a single instance of forgiveness of an amount owed in settlement of a bona fide dispute. The amount of the remuneration must be FMV and not determined in a manner that takes into account (i) the volume or value of referrals by the referring physician or (ii) other business generated between the parties.
• Nonmonetary Compensation – A DME supplier can spend up to $519 in 2025 on gifts/entertainment for a physician. Such expenditure does not include cash/cash equivalents. The dollar amount is tied to inflation and so it will likely increase each year. The expenditure cannot be determined in a manner that takes into account the volume or value of referrals of other business generated by the referring physician. Further, the expenditure may not be solicited by the physician.
• FMV Compensation – A DME supplier can pay FMV compensation to a physician for services if certain conditions are met, including: (i) the arrangement is set out in writing and covers only identifiable items, services, office space or equipment, (ii) the compensation must be set in advance and be FMV, (iii) the compensation is not determined in a manner that takes into account the volume or value of referrals or other business generated by the referring physician, and (iv) the arrangement would be commercially available even if no referral were made between the parties.
• Rural Provider – The rural provider exception state that an ownership interest by a physician in a rural provider is not considered a “financial relationship” under Stark. Rural providers are defined as those that furnish at least 75% of the designated health services they provide to residents of the “rural area.” At least 75% of the provider’s patients must be located within the “rural area.” A “rural area” is defined as “an area that is not an urban area as defined in 42 CFR 412.62(f)(1)(ii) which states that “the term urban area means a Metropolitan Statistical Area (MSA) or New England County Metropolitan Area (NECMA) as defined by the Executive Office of Management and Budget….”
• Timeshare Arrangement – If certain conditions are met, a DME supplier and physician can share the use of premises, equipment, supplies and services.
• Limited Remuneration to Physicians – If certain conditions are met, a DME supplier can spend up to $5000 during the calendar year on items or services for the physician. These conditions include: (i) the expenditure is not determined in a manner that takes into account the volume or value of referral or other business generated by the physician, (ii) the expenditure does not exceed the FMV of the items or services, and (iii) the arrangement would be commercially reasonable even if no referrals were made between the parties.

Jeffrey S. Baird, JD, is chairman of the Health Care Group at Brown & Fortunato, PC, a law firm based in Texas with a national healthcare practice. He represents pharmacies, infusion companies, HME companies, manufacturers, and other healthcare providers throughout the United States. Baird is Board Certified in Health Law by the Texas Board of Legal Specialization and can be reached at (806) 345-6320 or [email protected].