Stark law’s in-office ancillary services exception is one of the most commonly used exceptions because it allows physician practices to provide certain designated health services in the office, such as labs, imaging and therapy, without violating the physician self-referral law, according to a blog post from law firm Cranfill Sumner posted Jan. 28 in JDSupra.
Here’s what physicians should know:
1. The exception hinges on three requirements
- Supervision: Services must be furnished under the supervision of the referring physician, another physician in the group, or appropriate physician supervision, depending on the service.
- Location: Services must be provided in the group’s office or a centralized location used for patient care, a guardrail intended to prevent stand-alone ancillary referral centers.
- Billing: Services must be billed by the physician, the group practice, or an entity wholly owned by the physician or group, not a third-party billing arrangement.
2. The referring practice must meet Stark’s technical “group practice” definition
To qualify, the practice must operate as a single, integrated group, clinically and financially, including integrated operations and billing, and consistent methods for allocating overhead and distributing income. The group must also meet the “substantially all” test, meaning at least 75% of patient-care services must be furnished personally by physicians who are members of the group.
Compensation arrangements must also comply with Stark law. Physicians generally cannot be paid in a way that directly accounts for the volume or value of DHS referrals, even though groups may share profits or productivity-based income if structured within Stark’s rules.
3. CMS has clarified how subsidiaries can fit, but substance matters
CMS guidance indicates that wholly owned subsidiaries can still fit within the group practice definition if they are fully owned and properly integrated into one clinical and financial enterprise. CMS also emphasizes that structure alone isn’t enough: entities used mainly as billing pass-throughs or loosely connected clinical units are unlikely to meet the “single entity” and unified business requirements.
