Group Practice
Requirements & Advantages
Under the Stark Law
Rob Stone, Esq.
Alston + Bird
Presentation for Georgia Hospital Association
January 30, 2009
Presentation Objectives
• Understand requirements necessary to qualify as
a Group Practice under Stark.
• Understand the special rules related to a group
practice compensating its owners and employees
– Profit Sharing
– Productivity Bonuses
• Understand the In-Office Ancillary Services
Exception, including its requirements, limitations
and relationship to the Group Practice definition.
1
Why bother qualifying as a Group Practice?
• Meeting the definition of a group practice allows the
practice to:
(1) Take advantage of special compensation rules for its
physicians:
• A group practice is allowed to share profits with its
member physicians.
• A group practice is allowed to pay certain productivity
bonuses to its member physicians.
(2) Take advantage of the “In-Office Ancillary” exception to
Stark.
2
Why bother qualifying as a Group Practice?
• The Anti-Kickback Statute safe harbor for
“investments in group practices” specifically
cross references the Stark Law definitions of
Group Practice and In-Office Ancillary Services.
– In order for a physician-owner of a group practice to
fit within the AKS safe harbor, the practice must
qualify as a “group practice” under Stark. (Recent
OIG Advisory Opinion 08-24)
3
Group Practice Requirements
In order to qualify as a Group Practice under Stark, an entity must
meet all of the following requirements.
• Single legal entity
• Physicians – minimum of two who are either owners or
employees of the group (as opposed to independent contractors)
• Range of Care
• “Substantially All” Test
• Expenses & Income
• Unified Business
• Volume/Value of Referrals
• Physician/Patient Encounters
4
Single legal entity
• The practice must consist of a single legal entity (e.g.
P.C., LLC, NFP corporation, faculty practice plan)
• Operating primarily for purpose of being a physician
group practice (a hospital may not be a group practice)
• May be organized by any party or parties (including
physicians, health care facilities or others)
• May be owned (in whole or part) by another practice
organization, so long as it is no longer functioning as a
group practice.
5
“Substantially All” Test
• Substantially all (i.e. at least 75%) of the total patient care
services of the group practice members, must be furnished
through the group and billed under the group’s billing number
• Patient care services means: (i) total time each member spends on
patient care services, as documented by any reasonable means; or
(ii) any alternative measure that is reasonable, fixed in advance,
uniformly applied, verifiable and documented.
• Data used to calculate compliance must be made available to
Secretary of HHS upon request.
• HPSA Exception for the Substantially All test
• Start-up period (reasonable, good faith effort at compliance)
• Admitting new members (12 month grace period)
6
Other Requirements – Part I
• Physicians: At least 2 physicians who are “members of
the group” (i.e. either employees or direct/indirect
owners)
– Per CMS guidance, solo practitioners may also take advantage
of the benefits of group practice.
• Range of Care: Each employed or owner physician (not
including independent contractor physicians) must
furnish substantially the full range of patient care
services that the physician routinely furnishes through
the group practice.
• Expenses & Income: Overhead expenses and income
must be distributed according to methods determined
before receipt of payment.
7
Other Requirements – Part II
• Unified Business: Centralized decision making,
consolidated billing, accounting and financial reporting
• Volume/Value of Referrals: Except for special rules on
bonuses and profit sharing, no compensation to
physicians based on volume/value of referrals.
• Physician/Patient Encounters: Members
(owners/employees) of the group must personally
conduct no less than 75% of the physician-patient
encounters of the practice.
8
Special Rules for Productivity Bonuses
& Profit Sharing
• A “physician in a group practice” (which includes
employees, owners, and some independent
contractors) may be paid
– A share of overall profits of the group;
– A productivity bonus based on services that he or she
has personally performed (including services “incident
to”)
• Neither of the above may be determined in any
manner that is directly related to volume or value
of referrals of DHS by the physician.
9
Profit Sharing
• Division of overall profits must be done in a “reasonable and
verifiable” manner that does not directly relate to volume or value
of referrals of DHS.
• Overall profits means group’s entire profits derived from DHS, or
profits derived by any component of the practice consisting of at
least 5 physicians.
• Share of the profits will be deemed not to relate directly to
volume/value in the following situations:
– Per capita division;
– DHS revenues are distributed based on distribution of group’s non-DHS
revenues; or
– Revenues from DHS are less than 5% of group’s total revenues and
allocated portion of the DHS revenues constitute 5% or less of individual
physician’s total compensation.
10
Productivity Bonus
• Productivity bonus should be calculated in a “reasonable
and verifiable” manner not directly related to
volume/value of physician’s referrals of DHS.
• A bonus will be deemed not directly related to
volume/value if:
– Based on physicians total patient encounters or RVU’s
(including “incident to”);
– Based on allocation of physician’s compensation attributable
to services that are not DHS; or
– Revenues derived from DHS are less than 5% of group’s total
revenues and the allocated portion of the revenues to each
physician represent 5% or less of that physician’s total
compensation from the group.
11
In-Office Ancillary Services
Exception (IOAS)
•
Creates a Stark exception for most DHS services (only
furnishing certain DME is protected under IOAS)
• In order for a particular service to qualify for the
IOAS exception (allowing a physician to make a
referral for that service to an entity with which the
physician has a financial arrangement), the service
must meet all of the following requirements:
– Be performed by certain individuals;
– Be performed in certain locations; and
– Billed by certain person or entity.
12
In-Office Ancillary Services
Exception (IOAS)
•
Examples of common In-Office Ancillary services
include:
– X-ray machine (owned/leased by group and colocated with the group practice)
– Lab services (owned/leased by group and colocated with the group practice)
– Prescription drugs provided to patients of the group
– Physical Therapy/Occupational Therapy
– Certain DME (crutches, walkers, folding manual
wheelchairs, infusion pumps, glucose monitors)
13
IOAS – Performed By
•
The DHS must be performed personally by:
(1) the referring physician;
(2) a physician who is a member of the same group
practice as the referring physician; or
(3) an individual who is supervised by the referring
physician or supervised by another physician in
the same group practice as the referring
physician.
14
IOAS Supervision Requirement
• CMS has stated that the supervision requirements of the
IOAS exception are equivalent to whatever supervision
requirements Medicare has for billing the service.
• Note that a group’s independent contractors who meet
the following criteria are allowed to provide supervision
under the IOAS exception:
–
–
–
–
Direct contract between the physician and the group;
Treating group’s patients;
On group’s premises;
Have properly reassigned their claims to the group.
15
IOAS – Location Requirement
“Same Building”
•
The service must be furnished in one of the
following locations:
–
Option I - the “same building” in which:
•
•
(i) The referring physician (or his or her group) has an
office that is normally open to the physician’s (or
group’s) patients for medical services at least 35 hours
per week; and
(ii) the referring physician (or one or more members of
that physician’s group) regularly practice medicine and
furnishes physician services at least 30 hours per week
(these 30 hours must include services unrelated to DHS
payable by a government or private payer).
16
IOAS – Location Requirement
“Same Building” – cont’d
•
“Same building,” Option II:
•
•
•
The patient receiving the DHS service usually receives
physician services from the physician or members of the
group,
the referring physician (or group) owns or rents an office
that is normally open to the physician’s (or group’s)
patients at least 8 hours per week; and
the referring physician regularly practices medicine and
furnishes physician services to patients at least 6 hours
per week (these 6 hours must include some physician
service unrelated to DHS payable by government or
private payor).
17
IOAS – Location Requirement
“Same Building” – cont’d
•
“Same building,” Option III:
•
•
•
The referring physician is present and orders the DHS
during a patient visit on the premises;
the referring physician (or group) owns or rents an office
that is normally open to the physician’s (or group’s)
patients for medical services at least 8 hours per week;
and the referring physician (or group) regularly practices
medicine and furnishes physician services to patients at
least 6 hours per week (which must include physician
services unrelated to DHS payable by government or
private payer).
18
IOAS – Location Requirement
“Same Building” – cont’d
•
•
For all options, the “same building” means a
structure (or combination of structures) that
share a single street address as assigned by the
Postal Service.
Excluding all exterior spaces (lawns,
courtyards, driveways, parking lots) and mobile
vehicles, vans or trailers.
19
IOAS – Location Requirement
“Centralized Building”
•
Alternatively, the DHS may be performed at a
“Centralized Building,” which is defined as:
–
–
–
–
All or part of a building (including a mobile
vehicle, van, or trailer);
That is owned or leased on a full-time basis (24/7)
for a term of not less than 6 months, by a group
practice; and
Used exclusively by the group practice.
Note: a group may have more than one Centralized
Building.
20
IOAS – Billing Requirement
• The service must be billed by one of the following:
– The physician performing or supervising the service;
– The group practice of which the performing or supervising
physician is a member under a billing number assigned to the
group practice;
– The group practice if the supervising physician is a “physician
in the group practice” under a billing number assigned to the
group practice (this includes some independent contractor
physicians providing medical care to patients of the group)
21
IOAS – Billing Requirement
• The service must be billed by one of the following
(continued):
– An entity that is wholly owned by the performing or
supervising physician or by that physician’s group practice
under the entity’s own billing number or under a billing
number assigned to the physician or group practice; or
– An independent third party billing company acting as an agent
of the physician, group practice or entity under a billing
number assigned to the physician, group, or entity.
22
In-Office Ancillary Exception
• DME Limitations
– The In-Office Ancillary Exception is available for certain,
limited DME, including canes, crutches, walkers, and folding
manual wheelchairs, infusion pumps and blood glucose
monitors, if they meet certain additional conditions.
– To qualify, the group practice must also qualify as a Medicare
certified DME supplier.
• Special Rules for Home Care Physicians
– For a physician who primarily treats patients in their private
homes, the “same building” requirements are met if the
referring physician (or qualified nurse or tech accompanying
the physician) provides the DHS contemporaneously with a
physician service that is not a DHS.
23
Differences Between
Qualifying as a Group Practice
and the IOAS Exception
• Meeting the Group Practice requirements allows a group
of affiliated physicians to share revenue in ways that
might otherwise be prohibited. It also allows a group to
take advantage of the IOAS exception.
• The IOAS exception describes a set of services which
are not subject to the Stark law restrictions. It allows
physicians to refer for these services (that would
otherwise be considered DHS) to entities (i.e. a Group
Practice) with which the physician has a financial
relationship (either ownership or employment).
24
Additional Issues
• Ownership and Corporate Structure of a Group
Practice
• Employment by a hospital versus formation of a
group practice.
• Use of Independent Contractors
• Use of Mobile Facilities
• Leasing of Equipment/Space
• Pharmaceuticals
• Shared Space Arrangements
25
Ownership and Corporate Structure of a
Group Practice
• Under the “single legal entity” requirement, the
group practice entity may be legally organized by
any party or parties, including physicians, health
care facilities or others.
• However, it must be formed primarily for the
purpose of being a physician group practice (this
excludes hospitals from meeting the group
practice requirements.
26
Ownership and Corporate Structure of a
Group Practice – Cont’d
• Examples of corporate structures cited
affirmatively by CMS:
– Partnership between physicians;
– Partnership between physician and another party;
– LLC (must have at least 2 physicians as owners
and/or employees)
– Single legal entity owned by physicians through their
individual P.C.’s
– Joint venture with or without physician ownership (if
it employees at least 2 physicians).
27
Implications of Direct Employment by
Hospital or Health Care Facility
• Physicians employed by a hospital cannot qualify
as a group practice.
• These physicians cannot receive share of profits
generated from the hospital’s DHS services.
• Under the Stark Employment Exception, these
physicians may receive productivity bonuses for
services personally performed (but not under the
group practice rules).
28
Implications of Employment via
Subsidiary of Hospital
• Subsidiary may qualify as a group practice.
• Physicians can receive share of profits generated
from DHS services that are performed in
compliance with the IOAS exception (but not
DHS services conducted by the hospital).
• In either case, physicians may receive
productivity bonuses for services personally
performed (this is included in the Stark
employment exception).
29
“Physician in the group practice”
(e.g. Independent Contractors)
• Requirements for an independent contractor to be
considered a “physician in the group practice:”
– Has a contract directly with the practice;
– To provide services to the practice’s patients in the practice’s
facilities;
– Except for productivity bonuses or profit shares, does not
receive compensation based on volume/value of referrals;
– Services are billed by the group under a contract that complies
with the reassignment rules.
– Phase III commentary indicates concern about use of
independent contractors in centralized buildings.
30
“Physician in the group practice”
(e.g. Independent Contractors)
• Are not included in the 2 or more physicians test.
• Are not included in the “range of care” or “substantially all”
requirements.
• Are not factored in to the 75% physician/patient encounter
requirement.
• Are allowed to receive productivity bonuses or profit shares.
• May be allowed to make referrals to the group for DHS under the
IOAS or personal services exceptions (assuming the relevant
requirements are met).
• Under the IOAS exception, allowed to provide requisite
supervision of DHS services that are referred by another
physician in the group.
31
Mobile Facilities
• “Centralized Building” includes a mobile vehicle, van or
trailer that is owned or leased on a full-time basis .
• Nothing in the group practice or IOAS exception
prohibits physicians or group practices from
– Purchasing the technical component of mobile services (see
the purchased diagnostic testing rules);
– Arranging for a mobile provider to treat patients at the
physician or group’s office (as long as the arrangement fits an
exception)
• Note: the rural provider ownership exception may apply
to protect some ownership interests in mobile facilities.
32
Leases
• Part-time leases for centralized buildings are not
allowed.
– Group practices may lease or sublease DHS facility
space (including mobile units) to or from other group
practices or solo practitioners on a part-time basis –
but DHS provided to patients of a part time lessee
will not fit the IOAS exception.
• Nothing in these rules prohibit a physician or
group practice from leasing equipment that is
used in the performance of DHS.
33
Outpatient Prescription Drugs
• DHS is “furnished” where the service is
performed or where an item is dispensed to a
patient in a manner sufficient to meet applicable
Medicare payment rules.
• As a result, outpatient prescription drugs (which
are considered DHS under Stark) that are
dispensed in the group practice’s facilities (either
same or centralized building) may be covered by
the IOAS exception.
34
Shared Space Arrangements
• Under the “same building” requirement of the IOAS,
shared facilities are allowed, to the extent they comply
with the other IOAS requirements (supervision, location
and billing).
• Per Stark III, “a physician sharing a DHS facility in the
same building must control the facility and the staffing
at the time the DHS is furnished to the patient. . . . As a
practical matter, this likely necessitates a block lease
arrangement for the space and equipment used to
provide the DHS” (emphasis added).
• Per use fee arrangements are frowned on by the Stark III
commentary.
35
Group Practice
Requirements & Advantages
Under the Stark Law
Rob Stone, Esq.
Alston + Bird
Presentation for Georgia Hospital Association
January 30, 2009
36