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Stark Law Changes Effective January 1, 2022: What To Know

By Michael D. Magidson | Categories: Articles, Health Care, Health Care DefensePrint PDF September 2021

New regulations interpreting the Stark law that will become effective on January 1, 2022 will require physician groups to re-evaluate their compensation methodologies for distributing ancillary revenues. 

The federal physician self-referral law, more commonly known as the “Stark law,” prohibits (among other things) a physician group practice from allocating profits from “designated health services” (DHS) in a manner that takes into account, directly or indirectly, a physician’s referrals for such DHS.  DHS includes a variety of ancillary services that may be provided in a physician’s office, such as lab, x-ray, ultra-sound, MRI, CT, physical therapy, radiation therapy and outpatient prescription drug/infusion services.  The full list of DHS may be found here:   

New regulations that will become effective January 1, 2022 (available here: clarify CMS’s interpretation of Stark’s restriction on the allocation of DHS profits and will require physician groups to analyze their compensation methodologies to ensure compliance with the new rules.  Here is a summary of the most important changes:

Profits Not Revenues

Previously, the Stark rules used the terms “DHS profits” and “DHS revenues” interchangeably; CMS has clarified that practices must calculate and allocate DHS profits, as opposed to DHS revenues, by taking into account the expenses associated with such DHS revenues.


Under the current rules, many practices (and their lawyers) believed it was compliant to allocate all of a particular type of DHS profits to a particular pool of physicians, but the new rules clarify that groups must allocate all of the DHS profits referred by physicians in a pool.  For instance, it will no longer be permissible to allocate just x-ray profits to a particular group of physicians; the group will now be required to allocate all DHS profits generated by that group of physicians.  It will still be permissible to create pools based on physician specialty or practice locations, but all DHS profits must be taken into account in the allocation methodology. 

Must Include Non-Medicare DHS

While the Stark law is only applicable to items and services covered by Medicare and Medicaid, the new rules provide that groups may not allocate DHS profits based on physicians’ referrals for items or services not covered by Medicare or Medicaid if such items or services would be DHS if covered by Medicare or Medicaid.  

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