Stark and allocation of ancillary income

Stark dictates that ancillary income cannot be allocated based on referrals to the ancillary service.  As long as the ancillary income distribution formula is set in advance, is not based on referrals, and is of reasonable duration, it should pass muster.  As an example, your group could agree in advance that all physicians, including those who are not partners will share ancillary income (you could even say that 90% will be split by owners and 10% will be split by non-owners).

A distribution formula that in essence produced the same result as distribution based on referrals would probably not pass a smell test.

Many physician group practices have gone the distribution by ownership route because it is easy and has already passed scrutiny by the feds, making it essentially a safe harbor.  It also tends to be more readily accepted by the physicians in the group as being fair since the equipment used is generally an equal asset of all owners.

If you haven’t looked at it in a while, make sure your group compensation formulary is in compliance with Stark. If you are looking for a good resource (it requires an annual fee), take a look at MGMA’s www.starkcompliance.com website.

About the Author

Reed Tinsley CPA

This article is written by Reed Tinsley, a Houston, TX-based CPA with over 30 years of experience advising physicians and medical practices across Texas and the United States. Reed holds certifications as a Certified Valuation Analyst (CVA), Certified Healthcare Business Consultant (CHBC), and Certified Financial Planner (CFP), specializing exclusively in the healthcare sector. He is a published author, nationally recognized speaker, and trusted advisor to physicians on accounting & tax, practice management, and financial planning. Schedule a Free Consultation.