CMS Clarifies Practice Structure of Physician Self-Referral Law Group


In June 2021, the Centers for Medicare and Medicaid Services (CMS) released a notable interpretation of the Physician Self-Referral Law (aka Stark Law) in Advisory Opinion No. CMS-AO-2021-01 (Advisory Opinion) regarding whether a medical practice can provide Designated Health Services (DHS) through a wholly owned subsidiary while still being considered a group practice (as defined under the law on self-referral of doctors) for the purposes of compliance with various self-referral doctors Exceptions to the referral law.

Physician Self-Orientation Act

The Physician Self-Referral Act prohibits a physician from making a referral for certain DHS payable by Medicare to an entity with which the physician (or an immediate family member) has a financial relationship, with some exceptions. An exception often cited by medical offices is the Exception for Auxiliary Office Services Referrals, which exception is available for any medical office with two or more physicians if the medical practice is considered a “group practice” under of medical autonomy. Reference law. The regulations of the Physician Self-Guidance Act in turn provide that a group practice should be made up of a single legal entity operating primarily for the purpose of being a group practice of doctors, but also note that a group practice may itself have subsidiary entities.

Question presented

In this advisory opinion, CMS was asked whether a medical practice would not be considered a group practice under the Physician Self-Referral Act if the practice provided DHS through a wholly owned subsidiary that is a medical practice but does not qualify as a “group practice” within the meaning of the Physician Self-Referral Act. The request was submitted in connection with a transaction whereby a medical practice offers to acquire two subsidiaries and to provide DHS and other patient services through those subsidiaries, with the revenues accruing to the parent entity. The subsidiaries could not be qualified as group firms because they would be owned by another entity: the applicant.

Approval of arrangement

CMS concludes that this arrangement would not preclude the Applicant’s practice of qualifying as a group practice, based on the commentary to the preamble to its 1995 Final Rule and its 2001 Phase I Regulations, noting in part that the The regulatory exception expressly contemplates a group practice with subsidiaries which in turn provide services. CMS states that in its final rule of August 1995, CMS interpreted the Physician Self-Referral Act to allow a single group practice to own other legal entities for the purpose of providing services to the physician’s practice. group. For example, CMS observed that the exception for ancillary services to the office appears to anticipate that a group firm may own 100% separate legal entities for billing or the provision of ancillary services, and in the 1995 and 2001, the 1995 and 2001 rules used the example of a laboratory facility that provides laboratory services to a group practice as potentially compliant with the exception of ancillary office services. CMS thus determines that the proposed arrangement would not preclude the applicant from qualifying as a group practice, and therefore being able to avail itself of certain exceptions under the Physician Self-Referral Act if all requirements are met. otherwise satisfied.

CMS cautions that its advisory opinion analysis only applies to the extent that the subsidiaries remain wholly owned by the plaintiff, and CMS expresses no opinion on whether the proposed transaction otherwise satisfies the law on physician self-referral, or whether a DHS provided by physicians employed or contracted by the applicant would in fact satisfy the office ancillary services exception.

The advisory opinion therefore provides limited insurance for medical practices seeking to meet “group practice” requirements under the Physician Self-Referral Act and operating wholly owned subsidiaries. The advisory opinion is CMS’s first advisory opinion on the Physician Self-Referral Act in 2021, and comes as CMS considers further changes to the regulations of the Physician Self-Referral Act in the 2022 physician fee schedule.

Copyright © 2021 Robinson & Cole LLP. All rights reserved.Revue nationale de droit, volume XI, number 225


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