As of January 1 new Stark regulation clarifications are in effect, addressing the relationship between physicians and designated health services (DHS) like laboratory services, radiology services, and durable medical equipment and preventing physician efforts to refer Medicare patients to a DHS currently engaged in a financial relationship with the referring physician; this includes intra-practice referrals, which inherently possess a physician-DHS relationship.

If in compliance with specific geographic, supervision, and billing requirements, Stark law does offer one exception: Labeled in-office ancillary services, this exception allows Stark’s definition of “group practices” to engage in intra-practice Medicare patient referrals for DHS. Regulatory and transactional healthcare lawyer Ericka L. Adler, JD, LLM, suggests that appropriately allocating revenue for DHS profit is a key method of ensuring compliance with Stark’s group practice requirements. In other words, physicians should not receive any direct benefits from their referrals.

Adler notes a few specific clarifications in Stark regulations, like the illegality of “split pooling,” or doling out DHS-derived profits on a service-by-service basis. CMS expects practices to first collect the total amount of DHS-derived revenue and expenses and to then allocate that revenue in the same fashion, perhaps based on ownership percentage, using equal distribution, or based on general efficiency sans DHS. Another specific clarification in Stark regulations noted by Adler is that a group practice can create “pods” of no less than five physicians, with these pods permitted to use varying DHS profit allocation procedures among them. However, there must be a unified allocation strategy within each individual pod.

When examining its current compensation procedures, Adler suggests that practices take a number of steps. For example, drawing a diagram provides a clear picture of a practice’s methodology, allowing physicians to see who is performing various services and how those services are organized. Identifying physician pods is essential, as is identifying the practice’s DHS option. Adler notes that DHS options should solely include Medicare ancillary services and that DHS codes should be confirmed on the CMS website.

Also key is noting the allotment of DHS revenue and expenses among a practice’s physicians. The practice is required to opt for one single DHS allocation methodology for physicians and/or each pod. According to Adler, practices are well-advised to annually review their compensation methodology, which safeguards any potential oversights that could arise from possible changes within a practice, like alterations in pod sizes due to physicians entering or leaving a practice. These annual reviews also help ensure that a practice is up to date on any of Stark annual DHS coverage changes.

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Physician’s Weekly | January 21, 2022

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