CMS Income Sharing Changes Creating Confusion

Physician groups are now permitted to subdivide into groups of at least five physicians apiece – and that’s the root of the problem.

One of the provisions in the changes to the federal physician self-referral prohibition, better known as the Stark Law, announced in December 2020 imposes new limits on physician group practices. In particular, the Centers for Medicare & Medicaid Services (CMS) is requiring groups to distribute the profits from all designated health services exactly the same way. 

Historically, it has been possible to allocate Disproportionate Share Hospital (DSH) income for each type of DSH differently. For example, you could split income from imaging evenly, while basing physical therapy income on productivity and lab on seniority. CMS claims that they never intended to allow that level of flexibility, although over the last 25 years, I think there’s been near-universal agreement that that approach was legal. As of Jan. 1, CMS is insisting that if you are using “profit sharing” as a means to distribute income, you have to take all the profit from all designated health services, aggregate it, and split it in one consistent fashion.

CMS is permitting physician groups to subdivide into smaller units that contain at least five physicians. CMS takes the position that you can take the profit generated from designated health services within that subgroup and divide it among the subgroup. 

There are several things about this change that bother me, but most of them come down to this: I don’t believe that whoever wrote the change understands how physician compensation typically works, and they haven’t considered the unjust result. CMS fully recognizes that there are clinics with fewer than five physicians. Those clinics can share the profits from their ancillary income despite the fact that there are fewer than five of them. That creates the following perverse result. If three rheumatologists are in practice on their own, they can split the profit from their infusion business among themselves. However, should those same three physicians choose to join a multi-specialty group, their previously perfectly permissible compensation formula suddenly becomes improper. They would need to include at least two other physicians, or run afoul of the Stark Law. That’s utterly irrational. In fact, I would argue that it is arbitrary and capricious. For that reason, I’m hoping someone will choose to challenge CMS’s interpretation of the law.

Unfortunately, that challenge might run into a barrier in the form of the Illinois Counsel Supreme Court case. As we’ve discussed in past articles, that case stands for the principle that in many situations, one must wait for CMS to enforce their rule (in legal parlance, “exhaust your administrative remedies”) before you can ask a court to overturn a rule. Fortunately, there are some exceptions, and courts have heard some challenges to Stark, so there is reason for some optimism the rule can be challenged prospectively. 

The key point is that if you are either a physician group or a hospital that employs physicians, but chooses to use the group practice exception because it allows you to credit physicians for designated health services that are performed incident to the physician’s work, you need to understand the impact of these Stark changes. (For hospitals seeking to compensate employed physicians for infusions or physical therapy that they supervise, the in-office ancillary can be useful.)

Before Jan. 1, you will want to make sure your compensation formula satisfies the new criteria.

Programming Note: Listen to healthcare attorney David Glaser’s “Risky Business” report every Monday on Monitor Monday, 10 Eastern.

Facebook
Twitter
LinkedIn

David M. Glaser, Esq.

David M. Glaser is a shareholder in Fredrikson & Byron's Health Law Group. David assists clinics, hospitals, and other health care entities negotiate the maze of healthcare regulations, providing advice about risk management, reimbursement, and business planning issues. He has considerable experience in healthcare regulation and litigation, including compliance, criminal and civil fraud investigations, and reimbursement disputes. David's goal is to explain the government's enforcement position, and to analyze whether this position is supported by the law or represents government overreaching. David is a member of the RACmonitor editorial board and is a popular guest on Monitor Mondays.

Related Stories

Leave a Reply

Please log in to your account to comment on this article.

Featured Webcasts

CDI Query Mastery: Best Practices for Denial Prevention and Revenue Integrity

Physician queries are essential for accurate documentation and claims data, but they are increasingly scrutinized by payors, leading to denials and revenue leakage. This webcast, led by industry expert Cheryl Ericson, RN, MS, CCDS, CDIP, provides actionable strategies to craft compliant queries, reduce denials, and enhance revenue integrity. Attendees will gain insights into clinical validation queries, how to avoid common pitfalls, and learn best practices to defend against query denials. Don’t miss this opportunity to refine your query process and protect your organization’s financial health.

March 27, 2025
Heart Failure Coding Essentials: Ensuring Compliance and Optimal Reimbursement

Heart Failure Coding Essentials: Ensuring Compliance and Optimal Reimbursement

Master the complexities of heart failure coding with this expert-led webcast by Emily Montemayor, CCS, CMBCS, COC, CPC, CPMA. Discover strategies to ensure compliance with ICD-10-CM guidelines, documentation integrity, and capture comorbidities like CKD and hypertension. Learn how to resolve coding challenges, improve documentation practices, and submit clean claims to minimize denials and safeguard your organization’s financial health. With practical insights and real-world examples, this session equips you to prevent revenue leakage, enhance compliance, and secure optimal reimbursement—all while supporting better patient outcomes.

February 26, 2025
Decoding 2025 OPPS Charge Capture and Coding Complexities: Strategies for Success

Decoding 2025 OPPS Charge Capture and Coding Complexities: Strategies for Success

Prepare your organization for the 2025 OPPS updates with expert insights from Tiffani Bouchard, CCS, CRCR, a Revenue Integrity Professional with over 30 years of experience. This webcast will address critical challenges in charge capture and coding, providing clarity on APC policies, C-APC packaging, exclusions, and payer-specific requirements. Attendees will learn actionable strategies to ensure compliance, optimize reimbursement, and mitigate risks of claim denials. Gain the knowledge needed to implement updates effectively, educate your team, and maintain seamless revenue cycle operations in the face of evolving OPPS complexities.

January 29, 2025

Trending News

Featured Webcasts

Utilization Review Essentials: What Every Professional Needs to Know About Medicare

Utilization Review Essentials: What Every Professional Needs to Know About Medicare

Dr. Ronald Hirsch dives into the basics of Medicare for clinicians to be successful as utilization review professionals. He’ll break down what Medicare does and doesn’t pay for, what services it provides and how hospitals get paid for providing those services – including both inpatient and outpatient. Learn how claims are prepared and how much patients must pay for their care. By attending our webcast, you will gain a new understanding of these issues and be better equipped to talk to patients, to their medical staff, and to their administrative team.

March 20, 2025

Rethinking Observation Metrics: Standardizing Data for Better Outcomes

Hospitals face growing challenges in measuring observation metrics due to inconsistencies in classification, payer policies, and benchmarking practices. Join Tiffany Ferguson, LMSW, CMAC, ACM, and Anuja Mohla, DO, FACP, MBA, ACPA-C, CHCQM-PHYADV as they provide critical insights into refining observation metrics. This webcast will address key issues affecting observation data integrity and offer strategies for improving consistency in reporting. You will learn how to define meaningful metrics, clarify commonly misinterpreted terms, and apply best practices for benchmarking, and gain actionable strategies to enhance observation data reliability, mitigate financial risk, and drive better decision-making.

February 25, 2025
Navigating the 2025 Medicare Physician Fee Schedule: Key Changes and Strategies for Success

Navigating the 2025 Medicare Physician Fee Schedule: Key Changes and Strategies for Success

The 2025 Medicare Physician Fee Schedule brings significant changes to payment rates, coverage, and coding for physician services, impacting practices nationwide. Join Stanley Nachimson, MS., as he provides a comprehensive guide to understanding these updates, offering actionable insights on new Medicare-covered services, revised coding rules, and payment policies effective January 1. Learn how to adapt your practices to maintain compliance, maximize reimbursement, and plan for revenue in 2025. Whether you’re a physician, coder, or financial staff member, this session equips you with the tools to navigate Medicare’s evolving requirements confidently and efficiently.

January 21, 2025
Patient Notifications and Rights: What You Need to Know

Patient Notifications and Rights: What You Need to Know

Dr. Ronald Hirsch provides critical details on the new Medicare Appeal Process for Status Changes for patients whose status changes during their hospital stay. He also delves into other scenarios of hospital patients receiving custodial care or medically unnecessary services where patient notifications may be needed along with the processes necessary to ensure compliance with state and federal guidance.

December 5, 2024

Trending News

Happy National Doctor’s Day! Learn how to get a complimentary webcast on ‘Decoding Social Admissions’ as a token of our heartfelt appreciation! Click here to learn more →

CYBER WEEK IS HERE! Don’t miss your chance to get 20% off now until Dec. 2 with code CYBER24