Now is the time for all orthopedic groups to review their physician profit sharing or productivity bonus arrangements if your practice is structured as a “group practice” under the Medicare Physician Self-Referral (the so called (Stark Law)) – due to the upcoming effective date of revisions and clarifications issued by the Centers for Medicare and Medicaid Services (CMS).
By way of background a “group practice” is a defined term under the regulations implementing the Stark Law – not every group of physicians is a Stark group practice. To qualify as a “group practice”, the practice must satisfy various requirements relative to its organizational and operational structure, physician members, services, and how revenues are distributed. If a practice meets all such group practice requirements, it may pay physicians in the practice a productivity bonus or a profit share, subject to certain important conditions.
One of these conditions is that a profit sharing or productivity bonus is permissible only if it is not directly related to the volume or value of the physician’s referrals. Further, a practice must be structured as such a “group practice” in order to pay compensation to physicians that includes profits from in-office ancillary services, such as imaging, physical therapy, DME, and lab tests. Thus, an important benefit of qualifying as a “group practice” is that the prohibition on referrals of designated health services (“DHS”) does not apply to services which constitute “in-office ancillary services” – a Stark law exception that is only available to “group practices.”
In December of 2020, CMS issued a final rule changing various provisions of the regulations that interpret the Stark Law (the “Final Rule”), the majority of which became effective in 2021. However, certain changes governing how group practices compensate their physicians will not be become effective until January 1, 2022.
This article will discuss these upcoming changes impacting group practices – specifically the changes governing profit sharing and bonuses, and payments that relate to a physician’s participation in a value-based arrangement.