Many ophthalmologists who own or are considering an in-office optical dispensary have heard some version of the following: The Stark Law used to be a problem for optical shops, but that was fixed years ago. There is enough truth in that statement to be dangerous. The federal self-referral rules were amended in 2001 to address concerns about physician referrals for post-cataract eyewear, which refers to the Medicare-covered pair of conventional eyeglasses or contact lenses furnished after cataract surgery with insertion of an intraocular lens (IOL). This amendment resolved the most straightforward Stark exposure for physician-owned dispensaries referring their own patients for that covered service.1,2 What the shorthand version of the story omits is that meaningful legal risk remains in several common optical shop arrangements. That risk does not arise from the Stark Law, but from the federal Anti-Kickback Statute (AKS), state fee-splitting and corporate practice rules, and from the specific structure of how the optical operation is owned, managed, and connected to the practice's referral relationships.
Recent AKS and False Claims Act (FCA) settlements involving ophthalmology-optometry referral relationships underscore that these arrangements remain an enforcement-sensitive area. In April of this year, guidance from the Office of Inspector General (OIG) of the US Department of Health and Human Services clarified the relationship between Stark compliance, fair market value, and AKS liability3—making this a timely moment for practices to revisit how their optical shop arrangements are structured.
What the 2001 Stark Exception Actually Covers
The Stark Law generally prohibits a physician from making referrals for certain Medicare-payable designated health services to an entity with which the physician or an immediate family member has a financial relationship, unless an exception applies.1 Medicaid payment rules generally also incorporate related self-referral limitations.4,5,6 Designated health services include prosthetics, orthotics, and prosthetic devices and supplies—a category that, in the late 1990s, was interpreted to encompass postcataract eyeglasses and contact lenses.1,2 Under that interpretation, an ophthalmologist who performed cataract surgery and then referred the patient to a practice-owned optical shop for eyewear was potentially in violation of the Stark Law on every such referral.
The ophthalmology community—through advocacy by the American Society of Cataract and Refractive Surgery, the American Academy of Ophthalmology, and others—successfully argued that postcataract eyewear presented minimal risk of the overutilization the Stark Law was designed to prevent, in part because Medicare coverage is limited to one pair of conventional eyeglasses or contact lenses furnished after each cataract surgery with insertion of an IOL.2,7 The Centers for Medicare & Medicaid Services agreed. The 2001 final rule created a specific exception, now codified at 42 C.F.R. § 411.355(i), for eyeglasses and contact lenses following cataract surgery when furnished in accordance with applicable payment rules, effectively removing the Stark Law barrier to physician self-referral for that narrow category of service.8
That exception protects the central scenario, wherein an ophthalmologist refers a postcataract patient to the practice's own optical shop for the covered pair of eyewear. For that transaction, Stark is not the primary concern. The exception does not, however, resolve every legal question an ophthalmology practice faces in operating an optical dispensary. Two areas deserve particular attention.
The AKS Has No Parallel Exception, OIG Reaffirms
The federal AKS prohibits knowingly and willfully offering, paying, soliciting, or receiving anything of value to induce or reward referrals of items or services reimbursable by a federal health care program.9 Unlike the Stark Law, which is a strict liability statute requiring no proof of intent, the AKS is intent-based.1,9 Knowing and willful conduct to induce referrals is the core inquiry.
The AKS does not contain an exception parallel to the 2001 Stark postcataract eyewear exemption.9,10 This means that although Stark may not prohibit a physician from referring postcataract patients to a practice-owned optical shop, the AKS analysis is separate and must be evaluated on its own terms based on the structure of the arrangement and the nature of any financial relationship involved.
On April 23, 2026, OIG updated its General Questions Regarding Certain Fraud and Abuse Authorities FAQs with 2 clarifications that are directly relevant to optical shop arrangements. In the revised FAQ No. 4, OIG confirmed that a financial arrangement that satisfies a Stark Law exception may still violate the AKS.3 Compliance with Stark is not evidence that the parties lack the requisite intent under the AKS, and an arrangement can fit squarely within a Stark exception while still being actionable if one purpose of the remuneration is to induce or reward referrals. In the new FAQ No. 17, OIG addressed the role of fair-market value in AKS compliance and was direct: Paying someone at fair-market value (FMV) does not immunize an arrangement if the intent behind the payment is to generate referrals.3,10 Fair-market value is one required element of many AKS safe harbors, but it is not a standalone defense.3,10 Every other safe harbor condition must also be satisfied, and even full safe harbor compliance does not foreclose an intent-based inquiry under the AKS itself. The OIG characterized its position on both points as consistent and unwavering.3
For optical shop arrangements, this guidance matters in concrete terms: Fair-market value support for leases, management agreements, and compensation arrangements is important and should be documented, but it is not a complete AKS defense.3 Even FMV compensation can violate the AKS depending on the full facts and circumstances, including the parties' intent and the relationship between the financial arrangement and the flow of referrals.
For a straightforward dispensary owned and operated within the physician practice, AKS risk is often more manageable than in third-party or referral-source arrangements, but the analysis still depends on the full facts, including any patient inducements, marketing practices, compensation arrangements, billing practices, and relationships with outside referral sources.3,9,11 The analysis becomes considerably more complex in certain more complex arrangements.
Joint ventures between 2 or more independent practices operating a shared optical shop raise AKS concern because each practice is in a position to refer patients to an entity in which it holds a financial interest. The concern is especially acute where the arrangement resembles what OIG has identified as a suspect contractual joint venture, wherein an existing provider captures optical profits from its patient and referral base while a would-be competitor or supplier provides key operational inputs, such as management, personnel, equipment, space, billing, or supplies. OIG identified that pattern in its 2003 Special Advisory Bulletin on Contractual Joint Ventures and has remained skeptical of it since.11
Arrangements where an ophthalmology practice shares revenue with an optician or optometric practice that also refers surgical patients present a different version of the same concern. If an optometrist refers cataract patients to an ophthalmologist and that same optometrist has a financial arrangement with the ophthalmologist's optical shop through a colocation agreement, a management arrangement, or a revenue-sharing structure, the financial relationship and the referral flow run in the same direction. That pattern is precisely what the AKS targets.9,11
Relationships where optical shop discounts, favorable lease terms, or management fees flow between entities that are also in a referral relationship with each other should be evaluated with care. Even arrangements that appear facially legitimate can generate AKS exposure if the terms do not reflect FMV, if the arrangement lacks commercial reasonableness independent of referrals, or if the structure is designed in a way that rewards referral volume. In practice, documentation should include a written lease or management agreement with a fixed fee, independent FMV support, a commercially reasonable description of the services provided, and no adjustment mechanism tied to referral volume or patient capture.1,10
State Law Adds Another Layer
State fee-splitting statutes and corporate practice of medicine rules vary considerably and are not preempted by the 2001 federal Stark amendment. Several states restrict or prohibit arrangements under which a physician shares revenues from optical sales with a nonphysician or a separately organized entity, regardless of how the arrangement is structured at the federal level.12,13 Some states require optical dispensaries to be owned or supervised by licensed opticians or optometrists, creating complications for physician-owned dispensaries that rely on unlicensed or independently contracted staff to operate the retail function.14
Ophthalmology practices operating in multiple states should not assume that a structure that is legally sound in one state travels cleanly across state lines. Each state's optical dispensing licensure requirements, corporate practice rules, and fee-splitting prohibitions warrant separate review.
Where the Practical Risks Concentrate
Optical shop arrangements may create legal risk in a few recurring patterns, described here:
- Revenue-sharing with colocated optometrists: An optometrist who shares space with an ophthalmology practice and refers surgical patients to that practice creates a sensitive dynamic if the 2 parties also share revenue from the optical dispensary or if the optometrist receives below-market rent as part of an arrangement that includes the dispensary relationship. The government will look at whether the total value flowing between the parties reflects FMV for the services and space provided, independent of any referral relationship and, under OIG's April 2026 guidance, whether the arrangement is commercially reasonable even if FMV is documented.3
- Informal management arrangements: Practices that outsource the day-to-day management of the optical dispensary to a third party such as an individual optician, a management company, or a colocated optometric practice without a formal FMV-supported agreement create documentation gaps that complicate any subsequent legal review. The absence of written agreements, or the presence of agreements with terms that appear designed around a referral relationship rather than the actual services provided, is a recurring problem in practice.
- Compensation structures that track referral volume: Any arrangement under which optical shop revenue distributions, management fees, or payments to outside parties fluctuate in proportion to the number of surgical referrals received is a significant AKS concern. Compensation must be fixed and commercially reasonable independent of referral volume.9,10 Arrangements that functionally reward referrals, even if not labeled as such, are precisely what enforcement agencies look for.
- Multipractice joint ventures without documented FMV support: Where 2 or more practices co-own an optical entity, the ownership stakes, capital contributions, and distributions should reflect documented FMV analysis and satisfy all applicable safe harbor conditions, not just the FMV element.3,10,11 Arrangements where the contribution of referral volume is informally understood to substitute for capital investment are particularly vulnerable.
A Practical Review Checklist
Before or after establishing an optical dispensary arrangement, practices should be able to answer the following:
- Who is the legal owner of the dispensary, and is it inside the practice entity or separately organized?
- What referral sources have any financial connection to the dispensary, through leases, management, staffing, billing, revenue-sharing, or otherwise?
- Are all agreements written with fixed and FMV-supported compensation that does not vary based on referral volume or patient capture?
- Is the arrangement commercially reasonable and independent of any referral relationship?
- Do any distributions correlate with referral volume in practice, even if the agreement does not say so?
- Have applicable state optical dispensing, optometry, corporate practice of medicine, and fee-splitting requirements been reviewed for each state where the practice operates?
The Bottom Line
The 2001 Stark postcataract eyewear exception resolved the headline legal problem for physician-owned optical dispensaries, and that resolution has held. But the legal framework surrounding optical shop arrangements is broader than the Stark Law alone, and OIG's April 2026 guidance is a timely reminder that Stark compliance and FMV documentation do not independently resolve AKS exposure. Practices that operate on the assumption that the issue was resolved 25 years ago may have gaps they are not aware of. The AKS, state law, and the specific structure of joint ventures and referral-adjacent financial relationships remain live issues that warrant periodic review as practice structures evolve.
References
1. Limitation on certain physician referrals, 42 USC §1395nn. https://www.govinfo.gov/app/details/USCODE-2024-title42/USCODE-2024-title42-chap7-subchapXVIII-partE-sec1395nn/summary
2. Particular services excluded from coverage, 42 CFR §411.15. https://www.ecfr.gov/current/title-42/chapter-IV/subchapter-B/part-411/subpart-A/section-411.15
3. Office of Inspector General. General questions regarding certain fraud and abuse authorities. US Department of Health and Human Services. Updated April 23, 2026. https://oig.hhs.gov/faqs/general-questions-regarding-certain-fraud-and-abuse-authorities/
4. Fla Stat §456.053. https://www.flsenate.gov/Laws/Statutes/2023/456.053
5. 1 Tex Admin Code §371.1669. https://www.sos.state.tx.us/texreg/12ai/Rules.html
6. Cal Bus & Prof Code §650.01. https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=BPC§ionNum=650.01.&
7. Medical supplies, appliances, and devices: scope, 42 CFR §410.36. https://www.ecfr.gov/current/title-42/chapter-IV/subchapter-B/part-410/subpart-B/section-410.36
8. General exceptions to the referral prohibition related to both ownership/investment and compensation, 42 CFR §411.355. https://www.ecfr.gov/current/title-42/chapter-IV/subchapter-B/part-411/subpart-J/section-411.355
9. Criminal penalties for acts involving federal health care programs, 42 USC §1320a-7b. https://uscode.house.gov/view.xhtml?edition=prelim&num=0&req=granuleid%3AUSC-prelim-title42-section1320a-7b
10. Exceptions, 42 CFR §1001.952. https://www.govinfo.gov/app/details/CFR-2011-title42-vol5/CFR-2011-title42-vol5-sec1001-952
11. Office of Inspector General. Special advisory bulletin: contractual joint ventures. 68 Fed Reg 23,148 (2003). https://oig.hhs.gov/documents/special-advisory-bulletins/885/042303SABJointVentures.pdf
12. 144.00.18 Ark Code R §001. https://www.law.cornell.edu/regulations/arkansas/144-00-18-Ark-Code-R-SS-001
13. Ohio Admin Code 4725-5-06. https://codes.ohio.gov/ohio-administrative-code/rule-4725-5-06
14. Arkansas Ophthalmic Dispensers Act, §17-89-101 et seq. https://healthy.arkansas.gov/wp-content/uploads/ASBDO_law.pdf