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Stark Settlement Serves as Stark Reminder to Physician Groups

on Friday, 17 October 2014 in Health Law Advisory: Zachary J. Buxton, Editor

Many think that Stark is a law that regulates many aspects of hospital/physician relationships but doesn’t apply to physician group practices. The recent $1.3 million settlement involving Cardiovascular Associates d/b/a New York Heart Center serves as a reminder that the law also applies to Stark designated health services within a physician group practice and the practice’s compensation model.

The Heart Center is a cardiology group practice based in Syracuse, New York, with seven offices in upstate New York. On August 14, 2014, the Department of Justice announced the $1.3 settlement based on the distribution of group profits to shareholders on a basis directly related to the referrals or orders for CT scans and nuclear diagnostic tests by such shareholders. Of interest is that the Department of Justice stated in an interview that their investigation into this matter resulted from a tip.

The Stark law expressly prohibits group practices from sharing income from designated health services on a basis directly related to the volume or value of services ordered or referred by physicians. Revenues or profits can only be divided “in a reasonable and verifiable manner that is not directly related to the volume or value of the physician’s referrals of DHS.” Three safe harbors are stated: division equally to all, division based on practice revenues that are not DHS, and division where the dollars are small enough to meet a de minimus exception. Practice groups should review their compensation formulas to assure ongoing compliance with Stark.

John R. Holdenried

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