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New Stark Rule Effective January 1, 2022


We want to remind you of the new Stark provision that is effective on January 1, 2022. This change has to do with physician compensation plans where the physician compensation includes a payment for Medicare Designated Health Services (DHS). DHS is defined below.

No revision under the new Stark rules should be required:

  1. if your group practice pays physicians on a productivity bonus method under the Stark group practice provisions - see 42 CFR § 411.352(i)(2) attached; or
  2. if your group practice divides overall net profits equally among the owners of the group practice.

We have provided a recap of the new Stark Group Practice requirements that are effective on January 1, 2022 below.

  • Stark revised the definition of “overall profits” in the Group Practice Definition for the Special Rule for Productivity Bonuses and Profit Shares (“Special Rule”) located at 42 CFR § 411.352(i). See copy attached of the new rule.

  • Overall profits means the group’s entire 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.

  • If a group practice desires to distribute profits from DHS, the group practice must distribute based on one of two formulas:

    1. The group practice must aggregate all of the DHS profits of the entire group practice and then distribute those aggregated profits to a physician in the group practice in compliance with the Special Rule; or
    2. The group practice must aggregate all of the DHS profits within a pod of at least five physicians and then distribute the profits within the pod in compliance with the Special Rule.

  • DHS includes, but are not limited to: clinical laboratory services, physical therapy, occupational therapy, radiology and other imaging, radiation therapy, durable medical equipment, outpatient prescription drugs and other ancillary services that may be provided in the group. Some DHS is determined by CPT or HCPCS codes based on a code list published annually by CMS.

CMS Revisions clarified the following:

  1. That group practices cannot divide DHS profits differently within a pod of 5 physicians by type of DHS (e.g. one allocation for radiology and another allocation for lab). All of the DHS profit for that pod must be added together and then divided in the same manner for all the participants of that pod. Previously, the rule allowed for “split pooling” where the net profit of each type of DHS service could be allocated in a different method within the pod.
  2. Different pods of 5 physicians or more can divide DHS profits in different methodologies from other pods in the same practice – but the group practice must use the same methodology for distributing the overall profits for every physicians within each pod.
  3. DHS only includes funds from Medicare DHS services. Previously, it was thought to also include Medicaid DHS services.
  4. “Deeming provisions” mean the provisions in 42 CFR § 411.352(i)(1)(iii) that if one of these provisions are met then the arrangement is an acceptable division by CMS.

    • The prior rule referred to “revenues” in some of the “deeming provisions,” which was changed to “overall profits.” This means that profit sharing in a group practice can no longer be based on revenues, but must be based on DHS net profits.
    • The “deeming provision” that allowed a group practice to divide DHS profits based on the method used to distribute non-federal health care programs 42 CFR § 411.352(i)(1)(iii)(B) was also changed that now the group practice must exclude from its calculation of non-federal health care program revenues any revenues that would be considered DHS if payable by Medicare.

  5. CMS also added a new “value-based enterprise participation” 42 CFR § 411.352(i)(4) provision for those payments directly attributable to a physician’s participation in a value-based enterprise.
  6. The “Productivity Bonuses” portion of the group practice provision [see (2) on the attached 42 CFR § 411.352(i)(2)] remained largely untouched by CMS.

Any changes to the group practice’s allocation of DHS net profit must be documented and adopted by the group practice before January 1, 2022 to be effective with services provided on and after that date. The Stark group practice rules are very complex. Please let us know if we can provide any assistance if you must revise your compensation methodology.

Source: Sharron L. Swann of Swann & Waddill

If you have any questions about whether or not this applies to you please email Morey at

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