Stark Law Group Practice Requirements - Compliance Spotlight from CMS’ Recent Updates to Self-Disclosure Process

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The Centers for Medicare & Medicaid Services (CMS) published updates to the CMS Voluntary Self-Referral Disclosure Protocol (SRDP) on January 23, 2023. The SRPD is the CMS process for Medicare providers and suppliers to self-disclose actual or potential violations of the Stark Law. For further information about the SRDP and its requirements generally, see CMS’ helpful overview at its Self-Referral Disclosure Protocol Webpage.

The recent updates to the SRDP include the issuance of an updated version of the primary SRDP Disclosure Form, an updated Physician Information Form, and an all-new Group Practice Information Form. Additionally, the updated SRDP Disclosure Form reflects an administrative change related to the SRDP submission packet – the signed Certification, certifying the truthfulness of the information contained in the disclosure, no longer has to be submitted in hard copy and mailed to CMS. The whole packet can now be submitted electronically. The updated forms with instructions included can be found here. Providers must use the updated forms for SRDP disclosures submitted on or after March 1, 2023, and the updated forms may be used for disclosures submitted prior to March 1, 2023.

The most significant change as part of these SRDP updates is the introduction of the Group Practice Information Form. The Group Practice Information Form includes questions that are specific to physician practices that failed to qualify as a Stark Law “group practice” under 42 C.F.R. § 411.352. As such, CMS instructs that the Group Practice Information Form should be completed only by physician practices that are reporting noncompliance with the Stark Law arising from the failure to qualify as a group practice under § 411.352. If the noncompliance arose solely from such failure to qualify as a group practice, then the physician practice does not need to complete a Physician Information Form for each physician in the practice who made prohibited referrals to the practice (as it would otherwise need to do). The Group Practice Information Form prompts the disclosing party to identify and explain each element of the group practice requirements that the disclosing party failed to comply with.   

These changes to the disclosure process for group practice noncompliance reflect that CMS was receiving enough SRDP disclosures related to Stark Law violations under the group practice requirements that it felt compelled to streamline and simplify the process for such disclosures.  In fact, as part of its recent rulemaking process for the SRDP updates, CMS indicated that a significant portion of the SRDP self-disclosures submitted to date involve noncompliance with the group practice requirements. This is not surprising as the group practice requirements are detailed, nuanced, and include compensation restrictions that can be counterintuitive for physicians and physician practices who are not familiar with and focused on the application and scope of the Stark Laws hyper-technical requirements (e.g., compensating a physician directly for a service the practice does not realize is a designated health service or not realizing that the Stark Law prohibits direct compensation credit for certain Medicare ancillary services).

Accordingly, we wanted to take this opportunity to reiterate the key details of the Stark Law’s group practice requirements. See below for a detailed summary of such requirements: 

The summary below is comprehensive summary of the Stark Law’s group practice rules for purposes of this informational article but it is not exhaustive – certain sub-requirements have been omitted for the sake of brevity and clarity.   

(a) Single legal entity.  The group practice must consist of a single legal entity operating primarily for the purpose of being a physician group practice in any organizational form recognized by the applicable state. For purposes of this requirement, a single legal entity does not include informal affiliations of physicians formed “substantially to share profits from referrals, or separate group practices under common ownership or control through a physician practice management company, hospital, health system, or other entity or organization.” 

(b) Physicians. The group practice must have at least two physicians who are “members of the group” as defined at 42 C.F.R. § 411.351. Member of the group means, a direct or indirect physician owner of a group practice, a physician employee[i] of the group practice, a locum tenens physician (as defined under the Stark Law),[ii] or an on-call physician while the physician is providing on-call services for members of the group practice. A physician is a member of the group during the time he or she furnishes “patient care services” to the group as defined in the Stark Law.[iii] An independent contractor or a leased employee is not a member of the group (unless the leased employee meets the definition of an “employee” under 42 C.F.R. § 411.351). 

(c) Range of care. Each physician who is a member of the group must furnish substantially the full range of patient care services that the physician routinely furnishes, including medical care, consultation, diagnosis, and treatment, through the joint use of shared office space, facilities, equipment, and personnel. 

(d) Services furnished by group practice members. Except for limited circumstances during the start-up of a group practice, the onboarding of a new physician who relocated his or her practice, or for practices located in or services provided in a Health Professional Shortage Area (under Section 332(1)(A) of the Public Health Service Act), substantially all of the patient care services of the physicians who are members of the group (that is, at least 75 percent of the total patient care services of the group practice members) must be furnished through the group and billed under a billing number assigned to the group, and the amounts received must be treated as receipts of the group. Patient care services must be measured by the total time each member spends on patient care services documented by any reasonable means or any alternative measure that is reasonable, fixed in advance of the performance of the services being measured, uniformly applied over time, verifiable, and documented. Additionally, the data used to calculate compliance with this “substantially all” test and related supportive documentation must be made available to the government upon request. 

(e) Distribution of expenses and income. The overhead expenses of, and income from, the practice must be distributed according to methods that are determined before the receipt of payment for the services giving rise to the overhead expense or producing the income. Notwithstanding the foregoing, a group practice may adjust its compensation methodology prospectively, subject to restrictions on the distribution of revenue from designated health services below. 

(f) Unified business. The group practice must be a unified business having at least the following features: (i) Centralized decision-making by a body representative of the group practice that maintains effective control over the group's assets and liabilities (including, but not limited to, budgets, compensation, and salaries); and (ii) Consolidated billing, accounting, and financial reporting. 

(g) Volume or value of referrals. No physician who is a member of the group practice directly or indirectly receives compensation based on the volume or value of his or her referrals, except as provided in the special rules for profit shares and productivity bonuses below. 

(h) Physician-patient encounters. Members of the group must personally conduct no less than 75 percent of the physician-patient encounters of the group practice. 

(i) Special rules for profit shares and productivity bonuses. A physician in the group practice may be paid in accordance with the following rules related to compensation based on the group practice’s overall profits and/or productivity bonuses. Note that for the sake of brevity the summary below omits an additional category of permissible compensation related to value-based enterprise participation.

Overall profits – Notwithstanding requirement (g) above, a physician in the group may be paid a share of “overall profits” (as defined under the Stark Law)[iv] that is not directly related to the volume or value of the physician's referrals. Additionally, the overall profits must be divided in a reasonable and verifiable manner. The share of overall profits will be deemed not to directly relate to the volume or value of referrals if one of the following conditions is met:

• • Overall profits are divided per capita (for example, per member of the group or per physician in the group).
  • Overall profits are distributed based on the distribution of the group's revenues attributed to services that are not designated health services and would not be considered designated health services if they were payable by Medicare.
  • Revenues derived from designated health services constitute less than 5 percent of the group's total revenues, and the portion of those revenues distributed to each physician in the group constitutes 5 percent or less of his or her total compensation from the group.

Productivity bonuses – Notwithstanding requirement (g) above, a physician in the group may be paid a productivity bonus based on services that he or she has personally performed, or services “incident to” such personally performed services, that is not directly related to the volume or value of the physician's referrals (except that the bonus may directly relate to the volume or value of the physician's referrals if the referrals are for services “incident to” the physician's personally performed services). A productivity bonus must be calculated in a reasonable and verifiable manner. A productivity bonus will be deemed not to relate directly to the volume or value of referrals if one of the following conditions is met:

• • The productivity bonus is based on the physician's total patient encounters or the relative value units (RVUs) personally performed by the physician.
  • The services on which the productivity bonus is based are not designated health services and would not be considered designated health services if they were payable by Medicare.
  • Revenues derived from designated health services constitute less than 5 percent of the group's total revenues, and the portion of those revenues distributed to each physician in the group constitutes 5 percent or less of his or her total compensation from the group.

As evidenced by the apparent volume of SRDP disclosures related to noncompliance with the group practice requirements, and based on our own experience as healthcare attorneys, these requirements can be difficult for physician practices to understand and comply with. However, ensuring compliance with the group practice requirements is critical to a physician practice’s Stark Law compliance strategy. Several vital Stark Law exceptions, such as the in-office ancillary services exception which protects self-referrals from physician-owners of independent physician practices, require that the practice qualify as a “group practice” to satisfy the exception and receive protection.

Our Nexsen Pruet healthcare team has extensive experience advising clients on compliance with the group practice requirement and on Stark Law compliance more generally. For more information about how Nexsen Pruet can put our deep experience to work for you, please contact Chandler Martin at (803) 540-2161 or reach out to one of our other healthcare attorneys.

_{[i] Under 42 CFR § 411.351, employee means any individual who, under the common law rules that apply in determining the employer-employee relationship (as applied for purposes of section 3121(d)(2) of the Internal Revenue Code of 1986), is considered to be employed by, or an employee of, an entity.}

_{[ii] Under 42 CFR § 411.351, a locum tenens physician (or substitute physician) means a physician who substitutes in exigent circumstances for another physician, in accordance with section 1842(b)(6)(D) of the Act and Pub. 100-04, Medicare Claims Processing Manual, Chapter 1, Section 30.2.11.}

_{[iii] Under 42 C.F.R. § 441.351, patient care services means any task(s) performed by a physician in the group practice that address the medical needs of specific patients or patients in general, regardless of whether they involve direct patient encounters or generally benefit a particular practice. Patient care services can include, for example, the services of physicians who do not directly treat patients, such as time spent by a physician consulting with other physicians or reviewing laboratory tests, or time spent training staff members, arranging for equipment, or performing administrative or management tasks.}

_{[iv] Overall profits means the profits derived from all the designated health services of any component of the group that consists of at least five physicians, which may include all physicians in the group. If there are fewer than five physicians in the group, overall profits means the profits derived from all the designated health services of the group.}