Alice Gosfield, Episode 1 - Gosfield & Shay on Health Law: Debunking Stark Law Myths

What does the Stark Law regulate and who does it apply to?

Alice Gosfield explains that Stark Law prohibits physicians from referring Medicare patients for designated health services (DHS) to entities with which they or their immediate family members have a financial relationship—unless a specific exception applies. It primarily governs physicians, but its implications extend to hospitals, group practices, imaging centers, labs, and other health care entities.

What is the difference between fair market value and commercial reasonableness?

According to Gosfield, fair market value (FMV) is about the amount a willing buyer would pay a willing seller in an arm’s-length transaction. Commercial reasonableness, however, goes beyond valuation to address whether an arrangement makes sense from a business perspective—even if no referrals were made. Both concepts must be satisfied for Stark compliance, but they are not interchangeable. Many organizations mistakenly treat them as the same standard.

What counts as designated health services under Stark Law?

Designated health services include categories such as laboratory services, imaging, physical therapy, occupational therapy, radiology, and certain durable medical equipment. Gosfield emphasizes that physicians must clearly identify which services fall under Stark’s definition, as violations often stem from misclassifying or misunderstanding DHS.

Does billing under a single tax ID guarantee Stark compliance for group practices?

No. Gosfield stresses that simply billing under one tax identification number does not automatically make a group practice compliant with Stark. The statute has very specific group practice requirements, including rules about how income is distributed, how physicians are organized, and how productivity bonuses or profit-sharing are structured.

 

How can independent contractors be paid under Stark Law?

Independent contractors may be paid in ways similar to employed physicians, but the arrangements must still comply with Stark exceptions. Payments must be set in advance, consistent with fair market value, and not based on the volume or value of referrals. Gosfield advises practices to carefully document these arrangements to withstand regulatory scrutiny.

Can hospitals compensate physicians for quality performance?

Yes, but with caution. Gosfield explains that while hospitals can reward physicians for achieving quality metrics, the compensation must align with Stark requirements. Payments cannot be tied directly to the volume of referrals but may be structured around performance-based measures, such as improving patient outcomes or adhering to clinical guidelines.

What are the key requirements for group practices under Stark Law?

Gosfield notes that group practices must meet specific structural and operational requirements, such as:

• Having a unified business with centralized decision-making.
  
  
• Ensuring that substantially all services are provided through the group.
  
  
• Distributing profits and productivity bonuses in compliance with Stark rules.
  
  

She warns that many physician groups make errors in how they structure compensation, which can inadvertently trigger Stark violations.

What is “incident-to” billing and how does the anti-markup rule apply?

“Incident-to” billing allows services provided by non-physician practitioners (such as nurse practitioners or physician assistants) to be billed under a supervising physician’s National Provider Identifier (NPI) at 100% of the physician fee schedule. However, Gosfield clarifies that this is only permissible if specific supervision and documentation requirements are met. The anti-markup rule prevents physicians from profiting by marking up diagnostic services that are purchased or performed by outside entities, further complicating billing compliance.

How does Stark Law affect compensation models, productivity bonuses, and profit-sharing?

Compensation models must be carefully designed to ensure they are not based on the volume or value of referrals. Productivity bonuses are permitted, but only if they reflect personally performed services. Profit-sharing within a group practice is allowed, provided it meets Stark’s specific requirements. Gosfield stresses that improper structuring in this area is one of the most common sources of Stark violations.

What is Alice Gosfield’s key advice for physicians and practices on Stark compliance?

Gosfield’s advice is clear: physician groups and hospitals must not rely on myths or assumptions about Stark Law. Compliance requires understanding the statute’s nuances, documenting financial arrangements thoroughly, and ensuring that both fair market value and commercial reasonableness are met. By proactively addressing these requirements, organizations can avoid costly violations and regulatory penalties.