Stark Law in 2021: 4 updates for ASCs

From rules governing referrals for family members to compensation, here are four Stark Law updates from 2021 that ASC leaders need to know:

1. Immediate family members:

In a 2022 proposed payment rule update released July 23, CMS refined Stark Law regulations on indirect compensation arrangements for physician referrals to services performed by immediate family members.

CMS clarified the indirect compensation arrangement definition of compensation units as payment for anything other than services personally performed by the immediate family member. 

The proposed rule update includes payment for space, equipment and services performed by a family member, or company the family member has ownership in.

Read more here

2. Group practice structure:

CMS clarified in an advisory opinion that physicians are prohibited from referring patients for select designated health services to entities they have financial ownership in, unless the relationship falls under an exception.

CMS stated that a physician group practice could be defined as a "single legal entity" if the group met the following standards:

  1. All clinical employees are employed by or contracted with the physician group
  2. Subsidiary revenue and expenses are treated as group practice revenue and expenses

Read more here

3. Physician pay:

CMS and HHS made adjustments to the Stark Law Jan. 19 which affect calculations of fair market value for physician pay. CMS unveiled three definitions for fair market value in the new rule, focused on general services, equipment rental and office space.

The final rule defined general market value of compensation as "compensation that would be paid at the time the parties enter into the service agreement as a result of bona fide bargaining between well-informed parties that are not otherwise in a position to generate business for each other."

The final rule also addressed physician pay under value-based payments, saying organizations should base payments for outcomes on objective and measurable data. 

Read more here

4. Productivity bonuses and profit sharing:

On Dec. 2, CMS issued final regulations revising Stark Law, which will go into effect Jan. 1. The update included a section focused on productivity bonuses and profit sharing for medical groups.

Here are four quick notes from the final regulations:

1. The agency prohibits physicians from referring patients to their practices for designated health services, but does offer exceptions if the practice distributes profits appropriately.

2. 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.

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

Read more about the final regulations here.

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