January 25, 2022

Volume XII, Number 25

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January 24, 2022

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Deadline Approaches for New Stark Physician Group Practice Profit Distribution Rules

About a year ago, on Nov. 20, 2020, the Department of Health and Human Services Office of Inspector General and the Centers for Medicare and Medicaid Services (CMS) issued two final rules implementing sweeping changes to the Physician Self-Referral Law (Stark Law) and the Anti-Kickback Statute regulations. For the most part, those new rules went into effect on Jan. 19, 2021. One of the rules, however, relating to the Stark “group practice” definition will become effective on Jan. 1, 2022.

Under this new rule, CMS clarified what it means for a group practice to distribute “overall profits.” The revised rule states that “overall profits” are defined as “the profits derived from all the designated health services of the group.”[1] CMS further provided that “a physician practice that wishes to qualify as a group practice may not distribute profits from designated health services on a service-by-service basis.”[2]

In making this clarification, CMS addressed certain comments which advocated for a service-by-service methodology (referred to as split pooling) by noting there was no justification for such an interpretation of “overall profits.”[3] CMS also issued a reminder that group practices must meet all regulatory requirements to be eligible for the regulatory benefits of the “group practice” definition. While CMS clarified such service-by-service pooling is not allowed, differing methods amongst any sub-groups of at least five physicians remains permissible. Therefore, large group practices may continue to allocate overall profit distributions by sub-groups composed of at least five physicians so long as the method of distribution is consistent within each subgroup.[4] If the group practice has fewer than five physicians, “overall profits” means the profits derived from all the designated health services of the entire group, and the methodology must be consistent across all DHS service types.

Group practices must evaluate whether any changes are necessary to their profit sharing and compensation plans, and group practices that use sub-groups or split pooling must account for this change by Jan. 1, 2022, to remain compliant with the Stark Law.

[1] 85 Fed. Reg. 77492, 77561 (Dec. 2, 2020) (emphasis added). To be codified at C.F.R. § 411.352(i) effective January 1, 2022.

[2] Id.

[3] Id. at 77564.

[4] Id. at 77563.

© 2022 Dinsmore & Shohl LLP. All rights reserved.National Law Review, Volume XI, Number 302
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About this Author

Stacey A. Borowicz, Regulatory, Law and Healthcarre industry attorney at Dinsmore Shohl
Associate

Stacey Borowicz is an accomplished attorney who dedicates the majority of her business and regulatory practice to health care providers. Stacey brings with her more than a decade of front line experience in the health care industry as she acquired a rare set of skills as a medical researcher/scientist prior to entering the practice of law.

Stacey's experience in the healthcare representation is diverse and includes Medicare/Medicaid audit and overpayment appeals, voluntary disclosures and refunds. Stacey also brings a wealth of experience in...

614-227-4212
Timothy Cahill Health Care Attorney Dinsmore Law Firm
Partner Of Counsel

Tim is an attorney with more than two decades of experience in health care-related fields. He has worked as in-house counsel and external counsel for non-profit and commercial health care organizations, health systems, hospitals, physicians and physician groups, joint ventures, and other corporate clients. Most recently, Tim served in the role of general counsel of a regional health system, working closely with the executive team and board to further the organization’s strategic mission and significantly improve operating revenues.

In his practice, Tim has addressed a wide range...

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Brandi E. Liebing Healthcare Law Clerk Dinsmore Cincinnati
Law Clerk

Brandi focuses her practice on corporate health care law.  She reviews and edits corporate contracts, amendments, policies, and proposals, and regularly attends negotiations and client meetings. She received her J.D. from Northern Kentucky University.

A Cincinnati native, Brandi enjoys spending her free time watching Cincinnati sports, reading, and practicing hot yoga.

513-639-9236
Eric J. Plinke, Dinsmore Law, Health Care Lawyer, Corporate Attorney
Partner

Eric Plinke is a Partner in the Corporate Department and Health Law Practice Group, and he routinely advises corporate and individual clients regarding a wide-range of health care industry legal issues. He has counseled clients in practice formation and acquisition, hospital and joint venture transactions, hospital and medical practice affiliations, contract review and preparation, compliance programs, HIPAA regulations, scope of practice issues, telemedicine and Stark law and Anti-kickback statutes, as well as significant experience counseling in ambulatory surgery centers and other joint...

614-227-4213
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