Profit sharing, productivity bonuses for physicians: 5 Stark Law updates

Profit sharing, productivity bonuses for physicians: 5 Stark Law updates

Stark Regulatory Changes Effective January 1, 2022

The Centers for Medicare and Medicaid Services (CMS) recently implemented major changes to the Stark Law regulations, most of which are already in place. However, some health care providers may be less aware of the changes to the “special rule for productivity bonuses and profit sharing” within Stark’s group practice definition. 

What is the Stark Law?

The Stark Law generally prohibits physicians from referring patients to their practice for designated health services (DHS), including clinical laboratory services, certain therapy services, imaging services, and more. The agency does, however, offer exceptions if the practice distributes profits appropriately. 

In order to make in-office referrals of DHS without violating Stark, physicians rely on Stark’s “in-office ancillary services” (IOAS) exception. In its recent regulatory update, CMS made several clarifications to the special rule and announced changes that will take effect January 1, 2022. Here are some things you should know regarding the update. 

Five Things to Know about the Stark Regulatory Changes

  1. CMS will not allow groups to establish distribution pools based on service lines — a system some physicians groups have historically referred to as “split-pooling”. Groups that have been conducting “split-pooling” will need to adjust their compensation methodologies by the end of the year. 
  2. Physicians can only receive profits from a single distribution pool. Groups must place all the profits from DHS referred by particular physicians into the distribution pool to which those physicians have been assigned. 
  3. Physician groups can segment groups of five or more physicians by specialty, location, practice experience, tenure, or other criteria — provided that the share of overall profits is not directly because of volume or value of referrals.
  4. Physician practices do not have to distribute all DHS profits of a group or a group component of at least five physicians. Moreover, groups are not required to treat all components the same. A group may distribute all the DHS profits of one component and keep some or all DHS profits of another component.
  5. CMS has now clarified that a group can distribute overall DHS profits to its physicians if the group has less than five physicians, provided that it meets other special rule requirements and all profits are aggregated beforehand. 

You can find more information about the final rule here.

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