Healthcare Providers: What to Know About the New Stark Law Rule Revisions

August 3, 2021

At a glance:

  • The main takeaway: Group practices must adhere to new revisions to the Stark Law rules by January 1, 2022.
  • Impact on your practice: Physicians should consider how these regulatory changes will impact their compensation models.
  • Next steps: Rely on your Aprio advisor and healthcare attorney to determine how the guidance affects your physicians’ compensation.

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The full story:

Group practices have until January 1, 2022, to comply with new revisions to Stark Law group practice compensation rules. This change is expected to impact multispecialty practices and how physicians participate in profits from designated health services (DHS). Examples of DHS include:

  • Clinical laboratory services
  • Radiology and other imaging services
  • Home health services
  • Durable medical equipment and supplies, etc.

Recap: What is the Stark Law?

The “Stark Law,” also known as the Physician Self-Referral Law, prohibits a physician of a medical practice from making referrals for DHS payable by Medicare to an entity in which they have a direct or indirect relationship — either via ownership or compensation. However, the in-office ancillary services exception allows physicians to make referrals for certain DHS and bill Medicare for these services.

Under the final rules published December 2, 2020, the Centers for Medicare and Medicaid Services (CMS) indicated that overall profits cannot be allocated based on a DHS category. Physicians should understand how “overall profits” and “group practice” are defined in applying the provisions under federal regulations.

Defining group practice: The final rules define a group practice as one that operates as a single entity; has at least two physicians who provide a range of care; does not compensate a physician based on the volume or value of their referrals; and has members that conduct no less than 75% of the patient encounters.[1]

Defining overall profits: CMS has revised the definition of overall profits to mean profits from DHS for any portion of the group practice that consists of at least five physicians of the group. If there are fewer than five physicians, overall profits include all profits of the practice.

The above definitions result in certain implications to group practices’ allocation or compensation models. Group practices must now distribute profits from DHS in any five-physician group using the same methodology within that group. This provision does not apply to profits from non-DHS services.

The regulations provide an example of a group practice consisting of 15 physicians that provides a range of DHS services. For the purposes of allocating overall profits, the practice should divide into three five-physician groups and may distribute profits from one DHS service using a certain methodology within that five-physician group. That methodology cannot be related to the volume or value of the referrals, in compliance with the definition of group practice.

The bottom line

Physicians should consider how the changes to Stark Law group practice rules will impact their compensation models. Practices that compensate their physicians either via an hourly rate or salary will likely be unaffected by the new guidelines. However, most group practices use alternative compensation models, such as production-based, percentage of collections or base salary plus bonus.

Physicians should rely on their Aprio advisor, as well as their healthcare attorney, in light of recent guidance when determining the impact on physician compensation.

Contact us today for further assistance.

Related Resources

[1] 42 CFR 411.352.

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Angela Dotson

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