Many physicians I speak with are still surprised to learn that the federal Stark statute imposes restrictions on income division within group practices.  These restrictions only apply to profits generated from any of the Stark “designated health services” and only those that are covered by Medicare and Medicaid (including managed care), but if your group provides any of these designated services, the Stark income division rules apply to you and  penalties for failing to comply are steep.  )  Penalties for violating this statute include a $15,000 civil money penalty for each tainted referral and for each claim submitted pursuant to a tainted referral, as well as potential false claims liability.

Here are some of the basics (but realize that Stark is a complex and technical law so if you think this is an issue for your group, you should consult with a knoweldgeable health care attorney).  Stark designated health services include the following:

–clinical laboratory services;
–physical therapy services;
–occupational therapy services;
–radiology, including MRIs, CAT scans and ultrasound services;
–radiation therapy services and supplies;
–durable medical equipment and supplies;
–parenteral and enteral nutrients, equipment and supplies;
–prosthetics, orthotics, and prosthetic devices;
–home health services and supplies;
–outpatient prescription drugs; and
–inpatient and outpatient hospital services

Most physician group practices rely upon what is known as the Stark “in-office ancillary services exception” to legally permit them to refer to and bill for Stark designated health services within their practices.  One of the conditions of this exception is that the practice must meet Stark’s definition of a “group practice”.  And, group practices may only divide Stark profits in a limited number of ways.

Under Stark, physicians in a group practice may receive a share of the practice’s overall profits derived from the DHS of the group provided the share is not determined in any manner which is directly related to the volume or value of referrals by such physician.  The regulations define “a share of the overall profits” to mean a share in either all of the profits derived from the Stark services of the entire group or of any component of the group that consists of at least five (5) physicians.  This means that Stark DHS profits may be allocated among all physicians in the group or among subgroupings of no fewer than five (5) physicians – bu even then, the profits may not be allocated to individual physicians in a manner that reflects their referrals to the stark services.

The Stark regulators have provided the following examples of permissible income division formulas:

–per capita division of the overall profits (i.e., equally among all physicians in the group);
–based on the distribution of the group practice’s revenues attributable to services that are not Stark services payable by federal or private payors;
–Any distribution of Stark revenues if the group practice’s Stark revenues are less than 5% of the group’s total revenues, and no physician’s allocated portion is more than 5% of that physician’s total compensation from the group.

Physicians may also be paid productivity bonuses for personally-performed services (or incident to personally perfomed services) as long as the bonus is not directly related to the volume or value of referrals for Stark services by the physician.

Stark is a strict liability statute, so penalties will attach to a violative arrangement whether the violation was intentional or inadvertant.  Therefore, if you have not reviewed your income division formula for Stark compliance, you should do so without delay.