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Stark (Self Referral) Physician Compensation Revisions

The federal physician self-referral (“Stark”) law prohibits a physician from referring a patient to an entity with which the physician (or a member of the physician’s immediate family) has a financial relationship for the furnishing of designated health services (“DHS”) for which payment may be made under Medicare, unless an exception applies. DHS includes, for example, laboratory services, imaging services, and physical therapy services. A physician practice will typically rely on the Stark “in-office ancillary services” exception to allow its physicians to refer DHS for which the practice bills the Medicare program. In order to rely on the “in-office ancillary services” exception, a physician practice must qualify as a “group practice”.

A portion of the revisions to the Stark regulations, which take effect on January 1, 2022, focus on new physician compensation requirements within group practices regarding the distribution of DHS profits. Here is a link to the revised Stark regulations:

Under the revised regulations, here are some significant modifications regarding physician compensation arrangements:

  • In order for a physician group practice to share “overall profits” from DHS with its physicians, the group practice must first aggregate all DHS profits from the entire group practice, or aggregate all DHS profits from any component of the group practice that consists of at least five (5) physicians.

  • A physician group practice will no longer be permitted to distribute profits from DHS on a “split pooling” basis after January 1, 2022. “Split pooling” is the allocation of DHS profits on a service-by-service basis (based on an individual service line or type, such as imaging services).

  • There is no requirement that a group practice distribute DHS profits to physicians, but it can instead keep some of its profits.

  • The new regulations have clarified that the term DHS means only DHS payable, in whole or in part, by Medicare (not Medicaid).

  • There is an exception for profits from DHS that are directly attributable to a physician’s participation in a “value-based enterprise” (as defined in the new regulations) – such profits can be distributed directly to the physician without having to aggregate the profits with the overall profits of the group practice or in a component of five (5) or more physicians within the group practice.

Any providers required to comply with the new Stark regulations need to update their physician compensation arrangements, if necessary, prior to the January 1, 2022 compliance deadline in order to incorporate the changes noted above as well as to otherwise comply with the other applicable revisions to the regulations.

Please note that any embedded links to other documents may expire in the future.

Stark (Self Referral) Physician Compensation Revisions
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This Legal Briefing is intended for general informational and educational purposes only and should not be considered legal advice or counsel. The substance of this Legal Briefing is not intended to cover all legal issues or developments regarding the matter. Please consult with an attorney to ascertain how these new developments may relate to you or your business. © 2021 Law Offices of Pullano & Farrow PLLC.


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