Stark Law: What ASCs need to know this year

From laws governing physician self-referral to group practice structure, here are six Stark Law updates from 2021 that ASCs should know. 

1. Physician self-referral and indirect compensation:

CMS tightened regulations on physician self-referral and indirect compensation arrangements in its 2022 Medicare physician fee schedule final rule.

Three details: 

1. Indirect compensation arrangements exist if referring physician compensation depends on the volume or value of referrals for an entity providing designated health services, and the compensation unit isn't fair market value. 

2. CMS clarified an "individual unit" of physician pay as being based on the provided item, service or time. The individual unit of compensation only includes services the physician provides, not services performed by a physician's employee, independent contractors, group practice members or other individuals. 

3. The final rule prohibits the use of some service-based compensation formulas in leasing office space or equipment, targeting formulas that base the per-unit charges on patient services provided to the lessor.

Read more here

2. Group practice profit allocation:

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

Five clarifications:

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

2. "Overall profits" refers to 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.

Read more about the clarifications here

3. Immediate family members:

In a 2022 proposed payment rule update released last July, 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

4. 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: All clinical employees are employed by or contracted with the physician group and subsidiary revenue and expenses are treated as group practice revenue and expenses

Read more here

5. 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

6. Productivity bonuses and profit sharing:

CMS-issued final regulations also included a section on productivity bonuses and profit sharing for medical groups.

Four notes:

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. 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.

3. 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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