CMS clarified that wholly owned physician practice subsidiaries can meet the Stark Law in-office ancillary exception under certain circumstances in advisory opinion No. CMS-AO-2021-01.
1. 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, according to legal business publisher JDSupra. CMS stated in a June advisory opinion 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
- Subsidiary revenue and expenses are treated as group practice revenue and expenses
2. The advisory opinion addressed a physician group that wanted to purchase two other practices owned by the same physician. The subsidiaries being purchased did not qualify as group practices under Stark on their own, but the overall practice did meet the "group practice" definition.
3. After the acquisition, the two purchased physician practice subsidiaries would maintain prior payer arrangements and bill for designated health services with its own billing numbers, but all revenue and expenses would fall under the group practice umbrella.
4. CMS advised that the group practice in question could meet the in-office ancillary services exception after the acquisition, which offers some flexibility to physician owners.