Proposed Stark Law Changes May Impact Physician Compensation Models

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On October 9, 2019, the Centers for Medicare and Medicaid Services (“CMS”) proposed sweeping changes to the federal Physician Self-Referral Law, commonly referred to as the Stark Law. While many of the changes reflect CMS’ intent to allow greater flexibility to address certain value-based compensation arrangements, a somewhat overlooked proposal could have a material effect on how physician group practices allocate profits from Stark Law designated health services (“DHS”). Currently, many physician group practices, especially large or multi-specialty practices, allocate DHS profits to its physicians based on DHS categories. The result is that profits from one DHS category (e.g., imaging services) may be allocated to certain physicians in the group practice while profits from a second DHS category (e.g., physical therapy) may be allocated to a different (or possibly overlapping) subset of physicians in the group practice. Under the proposed rule, CMS would eliminate this approach and require that profits from all DHS be aggregated and distributed to either all physicians in the group practice or a component of at least five physicians in the group practice.

Originally published in the Birmingham Medical News - December 2019.

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