Stark law clarifies profit allocation for group practices: 5 things to know

The Stark regulations governing group practice rules will change Jan. 1. Business law publication Lexology laid out the new clarifications to group practice profit allocation. 

Unless an exception applies, Stark law prohibits physicians from referring patients for specified "designated health services" to a group the physician is financially involved with. Many medical groups rely on an in-office ancillary services exception, which requires the group to qualify as a "group practice." Groups that qualify for the exception are then subject to the profit allocation restrictions. 

Here are five clarifications to the group practice profit allocation rules:

1. Profit allocations and productivity bonuses can indirectly take into account volume or value of referrals.

2. "Overall profits" means the profits from all designated health services of any component of the group that consists of at least five physicians.

3. Profits from all of the services of the group should be accumulated and then distributed. A group practice cannot distribute profits on a service-by-service basis — also known as split-pooling. 

4. The reference to Medicaid was removed from a provision that allows certain methods for distributing profit shares. 

5. The requirements for paying productivity bonuses now match the provisions addressing the distribution of overall profits.

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