July 2025 Legal Intelligencer article by Lamb McErlane Health Law attorneys Vasilios J. Kalogredis, Esq. and Sonal Parekh, Esq.

Healthcare providers participating in Pennsylvania’s workers’ compensation system must navigate a specialized set of compliance risks that extend beyond traditional Medicare and Medicaid oversight. An important aspect of this is the self-referral prohibition set forth in the Pennsylvania Workers’ Compensation Act (“PWCA”).[1] While often overshadowed by federal counterparts like the “Stark Law”[2] and the Anti-Kickback Statute (“AKS”)[3], the PWCA’s self-referral provision imposes strict regulatory obligations on healthcare entities and professionals delivering care to injured workers. For compliance officers, in-house counsel, and healthcare attorneys, understanding the contours of this state-level restriction is essential to managing exposure and designing referral structures compliant on both a federal and state level.

The PWCA prohibits a healthcare provider from referring a workers’ compensation patient for “laboratory, physical therapy, rehabilitation, chiropractic, radiation oncology, psychometric, home infusion therapy or diagnostic imaging, goods or services” if the provider has a “financial interest” with the person or in the entity that receives the referral, unless a statutory exception applies.[4] The statute does not expressly define “financial interest” but appears to expansively include any ownership or investment interest or a compensation arrangement. Similarly, the provider may not enter into an arrangement or scheme (e.g., a cross-referral arrangement) which the provider knows or should know has the principal purpose of assuring referrals by the provider to a particular entity which, if the referral was made, would be in violation of the PWCA.

The restriction applies to a broad range of licensed practitioners, including physicians, chiropractors, physical therapists, and occupational therapists. The PWCA makes clear that services rendered pursuant to an unlawful referral are ineligible for reimbursement under the workers’ compensation fee schedule and therefore removes any obligation of an insurer to pay such bill.[5] Importantly, like the federal Stark Law, the PWCA imposes a strict liability regime—liability attaches without regard to intent, motive, or patient harm.

The statute provides several carveouts that healthcare attorneys must consider when structuring provider relationships or conducting compliance reviews. A referral is not prohibited if it would be permitted under all present and future Safe Harbor regulations promulgated under the Medicare and Medicaid Patient and Program Protection Act at 42 U.S.C.A. § 1320a-7b(1) and (2), published at 42 C.F.R. § 1001.952 (relating to exceptions), and all present and future exceptions to the Stark amendments to the Medicare Act at 42 U.S.C.A. § 1395nn. In other words, if the referral fits into a Safe Harbor under Stark or AKS, it is likely permissible under the PWCA.

From a compliance perspective, written disclosure is the most flexible and frequently used exception. To qualify, however, the disclosure must be made prior to the referral and must clearly identify the nature of the financial interest.[6] Best practices include keeping signed copies in the medical record and maintaining uniform disclosure templates for audit readiness.

The PWCA operates within a narrower payment ecosystem than its federal counterparts (i.e., Stark law and AKS). The PWCA only applies to workers’ compensation and functionally mirrors Stark’s structure by requiring objective, exception-based compliance. The PWCA diverges from AKS in not requiring intent.

For healthcare entities that operate both in the Medicare space and the workers’ compensation market, the PWCA adds an additional layer of legal complexity. Practices that are Stark-compliant may still trigger issues under the PWCA if disclosure protocols are lax or if the provider has a disqualifying financial interest in an outside facility used exclusively for workers’ compensation patients. Conversely, reliance on written disclosure as a “safe harbor” under the PWCA does not offer protection under Stark or the AKS.

Compliance professionals should audit referral patterns specific to workers’ compensation claims and review corporate ownership structures, lease arrangements, and provider compensation plans for alignment with the PWCA’s framework. Training programs for providers should explicitly include PWCA-specific guidance, especially for high-risk service lines like diagnostic imaging, physical therapy, and pain management.

The PWCA’s self-referral prohibition is a potent, state-level compliance obligation that dovetails—but does not fully overlap—with federal referral restrictions. For attorneys advising healthcare providers, the key takeaway is that PWCA compliance is not a subset of Stark or AKS compliance. It is a separate regulatory obligation that demands distinct policies, disclosures, and audit protocols. Structuring provider arrangements to satisfy both state and federal self-referral laws is not merely advisable—it is necessary to ensure continued participation in the Commonwealth’s workers’ compensation ecosystem and to avoid reimbursement denials, exclusion, or broader regulatory scrutiny.

If you have any questions or if we may be of further assistance relative to compliance with self-referral laws or other health law matters, please feel free to contact Bill Kalogredis, Esq. or Sonal Parekh, Esq.

Read the article in Legal Intelligencer / Law.com here.

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 [1] See 77 P.S. § 531(3)(iii) and 34 Pa. Code §§ 127.301-.302.

[2] 42 U.S.C. § 1395nn.

[3] 42 U.S.C. § 1320a–7b(b)).

[4] 77 P.S. § 531(3)(iii).

[5] See 24 Pa. Code § 127.302. Of course, if an insurer determines that a bill has been submitted in violation of the PWCA, it may follow the process outlined in the Pennsylvania Code of Regulations to explain the violation, and the provider may file an application for fee review with the Bureau.

[6] 35 P.S. § 449.22.

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Vasilios J. (Bill) Kalogredis, Esq. has been advising physicians, dentists, and other healthcare professionals and their businesses as to contractual, regulatory and transactional matters for 50 years. He is Chairman of Lamb McErlane PC’s Health Law Department. Bill can be reached by email at bkalogredis@lambmcerlane.com or by phone at 610-701-4402.

 Sonal Parekh, Esq., is an associate at Lamb McErlane PC who focuses on healthcare transactional matters and a broad range of healthcare regulatory-related issues on behalf of healthcare systems, physicians, dentists, and other healthcare providers, and is a pharmacist by education and training. Sonal can be reached by email at sparekh@lambmcerlane.com or by phone at 610-701-4416.

*This alert is for educational purposes only and is not intended to be legal advice. Should you require legal advice on this topic, any health care matter, or have any questions or concerns, please contact Vasilios J. (Bill) Kalogredis, Esq. or Sonal Parekh, Esq.