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A cardiology group practice this month agreed to pay $1.3 million to resolve allegations that it violated the Stark federal physician self-referral law and the False Claims Act by paying its physicians under a compensation formula that considered their referrals for nuclear and CT scans.

On August 14, 2014, the Department of Justice (DOJ) announced the settlement with the New York Heart Center, which has nine physicians and serves central and northern New York.

Group practices have substantial flexibility to structure physician compensation in compliance with the Stark Law, particularly in comparison with hospitals and other healthcare providers.  Groups, however, are not allowed to pay their physicians in a manner that takes into account the volume or value of their referrals of Medicare designated health services (DHS) unless the payments satisfy a special rule permitting group practices to compensate physicians through productivity bonuses and profit shares that may indirectly relate to referrals, or that qualify as de minimis. The government determined that the group knew that the formula violated the Stark Law but adopted it anyway.

Until this case, Stark Law enforcement has traditionally focused on financial relationships other than internal compensation arrangements within a group practice. This settlement may be a harbinger of escalating Stark Law scrutiny for group practice compensation, and provides another reminder of the need for group practices to take care in structuring their compensation arrangements with physicians and other referral sources to comply with e Stark Law and the federal anti-kickback statute as well as state law, and to periodically review their financial arrangements for compliance.

You can read the DOJ's press release here.

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