Stark Law In-Office Ancillary Services Exception (IOASE) Compliance
Audit clinical laboratories, diagnostic ultrasound, MRI/CT imaging, and physical therapy suites against strict CMS Group Practice and Designated Health Services (DHS) referral rules.
The federal physician self-referral prohibition (Stark Law, 42 U.S.C. § 1395nn) strictly prohibits doctors from referring Medicare patients for Designated Health Services (DHS)—including clinical laboratory tests, physical therapy, and diagnostic imaging—to an entity with which the doctor has a financial relationship, unless a specific statutory exception is met. The In-Office Ancillary Services Exception (IOASE) is the foundation of ancillary revenues for multi-specialty groups, but it requires strict compliance with three legal tests: the Group Practice Definition, the Same Building / Centralized Building Test, and the Direct Supervision Requirement. Kompanie LLP conducts forensic Stark audits, restructuring physician compensation formulas to ensure zero Medicare billing exposure.
Deliverables
- Group Practice Definition verification (satisfying the Single Legal Entity, Unified Business, and 75% Full Range of Services tests).
- Direct physical supervision audit for in-office phlebotomy, diagnostic imaging, and physical therapy suites.
- Physician DHS profit distribution formula redesign: decoupling ancillary income from direct volume or value of referrals.
- Centralized Building Exception validation for off-site diagnostic hubs and reference laboratories.
Frequently asked questions
Can a physician group distribute laboratory or imaging profits based on how many tests each doctor orders?
No. Stark Law strictly prohibits distributing overall profits from Designated Health Services (DHS) in a manner directly related to the volume or value of referrals. Profits can only be allocated per capita, based on non-DHS revenues, or in accordance with compliant group practice productivity benchmarks.
What is the penalty for violating the Stark Law in an acquired medical practice?
Violations of Stark Law result in strict liability: all Medicare claims for referred DHS must be fully refunded, with civil monetary penalties of up to $15,000 per billable service and potential False Claims Act treble-damage exposure.