Like many states, California law contains prohibitions against physicians referring patients to health care entities in which the doctors have a financial interest.


California law does parallel Stark in part. It is relevant setting forth the entire statute to ensure no provisions apply to the client.

            Business & Professions Code, Section 650.01(a) makes it unlawful for a “licensee” (defined as “physician”[1]) to refer a person for:


·         laboratory, diagnostic nuclear medicine, radiation oncology, physical therapy, physical rehabilitation, psychometric testing, home infusion therapy, or diagnostic imaging goods or services, if

·         the licensee or his or her immediate family has a financial interest with the person or in the entity that receives the referral.


            Section 650.02 sets forth certain exceptions including referrals to a rural practice, commercially reasonable leases, a personal services arrangement that meets specified criteria, and other exceptions that in part parallel those contained in the federal Stark rules. Section 650.1 addresses cost-sharing with respect to pharmaceutical services and products. 

            The succeeding sections contain exceptions relating to a group advertising and referral service for: dentists (650.2), chiropractors (650.3), marriage and family therapists (650.4).

            Section 651 addresses false and misleading advertising for the purpose of or likely to induce the rendering of professional services or furnishing of products in connection with the professional practice or business for which he or she is licensed. 

            Section 651.3 addresses entities contracting with health care service plans.

            Section 652 states that violation by a licensed person constitutes unprofessional conduct and by a place of business could constitute grounds for suspension or revocation of the business license. 

            Section 652.5 states that a violation constitutes a misdemeanor “as to any and all persons, whether or not licensed under this division.”

            Section 654 states that:

No person licensed under Chapter 5 (commencing with Section 2000) of this division may have any membership, proprietary interest or coownership in any form in or with any person licensed under Chapter 5.5 (commencing with Section 2550) of this division to whom patients, clients or customers are referred or any profit-sharing arrangements.

            Section 654.1 addresses referrals to clinical laboratories. Section 654.2 addresses charges, billing, and payments where the licensee has a financial interest.

            Section 654.3 addresses open-end credits by dentists. Section 655.2 addresses audiologists and hearing aid dispensing. Section 655.5 addresses billing for clinical laboratory services. Section 655.7 addresses billing for anatomic pathology services, and Section 655.8, payments for CT, PET and MRI diagnostic imaging services.

            Sections 656-657 address enforcement and penalties.


California B&P 2097 also requires a licensed physician to report to the California medical board of any financial interest that he or she or immediate family member owns in a health-related facility.  if the physician refers the patient to an organization in which he or she has a financial interest (other than referrals prohibited under Stark or PORA (the Physician Ownership and Referral Act), the physician must disclose to the patient in writing that he or she holds such interest.

[1] As “physician” is defined in Section 3209.3 of the Labor Code:

"Physician" includes physicians and surgeons holding an M.D. or D.O. degree, psychologists, acupuncturists, optometrists,
dentists, podiatrists, and chiropractic practitioners licensed by
California state law and within the scope of their practice as
defined by California state law."

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If you have legal questions concerning telemedicine and telehealth practices, or about kickback and fee-splitting legal issues in New York, California, Massachusetts, Washington DC, and other states, contact a lawyer who knows the rules.

Consult an experienced health care law attorney who knows complementary medicine and integrative medicine for legal advice pertaining to any project involving allied health or CAM professionals.


Our law office has attorneys with legal experience  in FDA matters, including guiding  clients involved in health care  delivery, group medical and private  medical practice, who are concerned  about issues at the interface of  federal and state law, concerned  about medical board discipline or  medical malpractice liability  issues.  We also review and draft informed  consent forms and guide  clients concerning a variety of health care law  issues.


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