By Kim Stanger

The Ethics in Patient Referrals Act (“Stark”) prevents hospitals from paying employed or contracted physicians in the same way that physicians are or were paid by independent physician groups.  Specifically, physician groups may generally pay physicians a share of the profits from services performed by others, but hospitals may not pay physicians in a way that varies with the volume or value of referrals for certain services payable by Medicare or Medicaid, which usually precludes paying physicians a share of profits or a percentage of fees for services referred or ordered by the physician but performed by others.

Stark Requirements.  Per Stark, if a physician (or a member of the physician’s family) has a financial relationship with an entity, the physician may not refer patients to that entity for certain designated health services¹ payable by Medicare or Medicaid unless the financial arrangement is structured to fit within a regulatory safe harbor.  (42 USC § 1395dd; 42 CFR § 411.353).  Under Stark’s “group practice” safe harbors, physician groups that qualify as a “group practice” may pay physician group members based on services the physician personally performs, services billed “incident to” the physician’s personally performed services, or, subject to certain limits, a portion of the overall profits of the group, including profits from services derived from services performed by others.  (See 42 CFR §§ 411.353 and 411.355(a)-(b)).  These “group practice” safe harbors are not available to physicians who are employed by the hospital. Read more