Profit sharing, productivity bonuses for physicians: 7 Stark Law updates

CMS clarified the rule allowing in-office ancillary service referrals without violating Stark Law and announced changes that will take effect Jan. 1, 2022.

The agency prohibits physicians from referring patients to their practices for designated health services, but does offer exceptions if the practice distributes profits appropriately. CMS' Dec. 2 update included a section focused on productivity bonuses and profit sharing for medical groups, as outlined in JDSupra.

Seven things to know:

1. CMS doesn't allow "split-pooling," in which practices develop profit distribution pools based on service lines. The rule will require groups that currently have "split-pooling" distribution models for designated health services profits to revise compensation methodologies by the end of the year.

2. The rule clarifications imply physicians can only receive profits from a single distribution pool, according to JDSupra.

3. Physician practices can segment groups of five or more physicians by specialty, location, full or part-time status, and tenure, among other criteria, for profit sharing if the groups are not related to the physicians' referral volume or value.

4. CMS clarified that physician practices don't have to distribute all profits from designated health services.

5. Physician practices can treat physician distribution groups differently for profit sharing, and can use separate distribution methods for each group.

6. Practices are required to use a single distribution method for all physicians within a distribution group.

7. CMS will allow practices to distribute all profits to distribution groups with less than five physicians if the practice meets exemption requirements and aggregates all designated health services profits before distribution.

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