Here’s how to make sure your practice is in compliance with Stark regulation clarifications taking effect January 1st, 2022.
As the end of the year approaches, physician practices need to start planning for 2022. From a legal perspective, this planning should include a review of the practice’s compensation methodology to assure compliance with Stark regulation clarifications, which will take effect January 1, 2022.
The Stark law generally prohibits a physician from referring a Medicare patient for a designated health service (DHS) to an entity with which the physician has a financial relationship, unless there is an applicable exception. DHS includes many ancillaries which are used in physician practices, such as DME, laboratory, and radiology services. Referrals within the physician practice implicate the Stark law since physicians have a financial relationship with their own practice.
Physician practices that qualify as “group practice” under Stark’s definition can take advantage of an exception to Stark known as the in-office ancillary services (IOAS) exception. Under this exception, physician practices can self-refer Medicare patients for DHS by generally meeting certain location, billing, and supervision requirements.
A key component of being a “group practice” under Stark is making sure that the group practice is allocating revenue for DHS profit in a compliant manner. This means that a physician practice must have a methodology that at all times allocates the revenue from DHS in a manner that does not reward physicians directly for their referrals. Although Stark’s DHS allocation rules have been in place for years, CMS felt that clarification of the requirement was appropriate. Among the key points CMS clarified about the profit allocation rules were the following:
1. A group practice cannot distribute profits from DHS on a service-by-service basis (also known as "split pooling"). This means, for example, that dividing up MRI DHS equally, but dividing up lab DHS based on overall profits, is not acceptable. Instead, CMS wants group practices to aggregate all revenue and expenses from all DHS service lines and then distribute that revenue using the same methodology. Popular approaches to allocate revenue and expenses within a group practice included equal distribution, based on ownership percentage, or based on overall productivity (not including the DHS).
2. A group practice can also segregate and allocate DHS profits generated by "pods" of at least five physicians and within those pods, the group is permitted to use different profit allocation methodologies. However, within each pod, groups must use the same one methodology for all DHS.
To start the process of evaluating a practice’s compensation approach, consider the following:
Compliance with Stark is essential for physician practices that see Medicare patients and self-refer for DHS. The consequences of non-compliance are financially and legally significant. Talk to your health law counsel and financial advisors so that a plan can be in place before the end of the year.