Physician practices depend on Stark law exceptions to keep routine financial relationships lawful, but the law imposes liability without regard to intent. That means an arrangement can fail on paper alone, according to an Oct. 4 blog post from Anthony Mahajan, founding partner of Health Law Alliance.
Here are seven things to know:
1. The in-office ancillary services exception is the one practices use most. It allows a physician to refer patients to the physician’s own practice for certain designated health services, including clinical lab tests, physical therapy and imaging. The services must be furnished in the office under one of the exception’s location and supervision arrangements and billed through a qualifying arrangement.
2. Multi-physician groups face an extra threshold. Beyond the service-level conditions, the practice must meet the separate regulatory definition of a group practice. Solo physicians face fewer conditions to qualify.
3. The group practice test has several requirements. The group must operate as a single legal entity, not an informal arrangement used mainly to split referral income, according to the post. Each member must furnish substantially the full range of services they routinely perform through the group’s shared space, equipment and staff. The regulation generally requires at least 75% of the group members’ total patient care services to be furnished through the group and billed under its billing number. The group must also have centralized decision-making and set its methods for distributing overhead and income before receiving payment for the services involved.
4. One member’s drift can affect the whole group. If compensation starts tracking individual referrals, the group can lose the exception for every member, not just the physician whose arrangement changed.
5. Employment, contractor work and leases fall under separate exceptions. Employed physicians’ pay must be consistent with fair market value and not based on the volume or value of referrals, with a limited exception for productivity bonuses tied to services the physician personally performs. Medical directorships, call coverage and independent contractor work may fall under the personal service arrangements exception. Space or equipment leased from a physician-owned entity falls under the rental exceptions. Several of these call for a written agreement of at least one year, with compensation or rent set in advance at fair market value.
6. Paperwork is where arrangements often fail. Common gaps include expired agreements that were never renewed, unsigned signature pages and compensation formulas that begin moving with referral volume, according to the post. CMS has relaxed several writing, signature and holdover rules in recent years, so an expired agreement or missing signature is not necessarily fatal. Whether a lapse can be cured depends on the specific exception and current rule text.
7. Stark penalties are civil, not criminal. Unlike the Anti-Kickback Statute, which requires proof of intent, Stark is a strict liability law. A violation can trigger payment denials, refund obligations and civil monetary penalties, and claims submitted knowingly can lead to False Claims Act liability.
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