CMS Pub. 100-04, ch. 1, § 180.1

Under Section 1877 of the Social Security Act (the Act) (42 U.S.C. §1395nn), a physician may

not refer a Medicare patient for certain designated health services (DHS) to an entity with which

the physician (or an immediate family member of the physician) has a financial relationship,

unless an exception applies. Section 1877 of the Act also prohibits the DHS entity from

submitting claims to Medicare, the beneficiary, or any entity for DHS that are furnished as a

result of a prohibited referral. The following services are DHS: clinical laboratory services;

radiology and certain other imaging services (including MRIs, CT scans and ultrasound);

radiation therapy services and supplies; durable medical equipment and supplies; orthotics,

prosthetics, and prosthetic devices; parenteral and enteral nutrients, equipment and supplies;

physical therapy, occupational therapy, speech-language pathology services; outpatient

prescription drugs; home health services and supplies; and inpatient and outpatient hospital

services. A “financial relationship” includes both ownership/investment interests and

compensation arrangements (for example, contractual arrangements between a hospital and a

physician for physician services). The statute and regulations enumerate various exceptions to

the physician self-referral prohibition. Violations of the statute are punishable by denial of

payment for all DHS claims, refunds of amounts collected for DHS claims, and civil money

penalties for knowing violations of the prohibition. Applicable regulations are published at 42

C.F.R. Part 411, Subpart J.