Multi-disciplinary health care clinics and medical spas need to address legal concerns surrounding Stark, kickback, and fee-splitting issues.

One of the most confusing arenas surround Stark is the series of rules dedicated to "incident to" medical services.


            Why do we care about "incident to?"

The first thing to do is learn about the physician services exception.


The “physician services” exception[1] provides that the Stark prohibition on referrals does not apply to physician services furnished:


(i)                 Personally by another physician who is a member of the referring physician’s group practice or is a physician in the same group practice as the referring physician; or

(ii)               Under the supervision of another physician who is a member of the referring physician’s group practice or is a physician in the same group practice as the referring physician, provided that the supervision complies with all other applicable Medicare payment and coverage rules for the physician services.

            This rule has several additional components:



·         For purposes of this exception, physician services only include incident to services. Because the definition of “incident to” is complex, it is set forth below.


·         The term “physician services” refers to[2] services including diagnosis, therapy, surgery, consultations, and home, office and institutional calls, furnished by a licensed “physician” (as defined above—i.e., a doctor of medicine or osteopathy, doctor of dental surgery or dental medicine, doctor of podiatric medicine, doctor of optometry, or chiropractor) acting within the scope of his or her license.


·         Physician services “include only those ‘incident to’ services (as defined in §411.351) that are physician services under §410.20(a) of this chapter.” (See Appendix 2 for definition of “incident to”).



                In addition, there are several important definitions nested within this exception. 




o   The first definition is group practice. Due to the length and complexity of this definition, it is set forth in elsewhere. Within this definition, the “substantially all” test referenced elsewhere is designed to ensure that members of the group practice are devoting a significant amount of their time (75% in the aggregate) to providing services through the group.



o   The second relevant definition is physician in the group practice. This means a member of the group practice, as well as an independent contractor physician during the time the independent contractor is furnishing patient care services for the group practice under a contractual arrangement with the group practice to provide services to the group practice’s patients in the group practice’s facilities.[3]



In other words, the exception requires that independent contractors have a direct contractual relationship with the group that bills for them. Further, the exception does not apply to an independent contractor located off-site,[4] unless part of a center with multiple office sites.



[1] 42 CFR 355(a).

[2]42 CFR 410.20(a), which is referenced in the first sentence of 42 CFR 411.355 for the definition of “physician services.” Service is covered by Medicare Part B if furnished within the limitations specified in 410.22 through 410.25. These rules specify limitations on services of a chiropractor (410.21), optometrist (410.22), services involving screening for glaucoma (410.23), services of a doctor of dental surgery or dental medicine (410.24), and services of a podiatrist (410.25).

[3] The contract must contain the same restrictions on compensation that apply to members of the group practice under §411.352(g) (or the contract must fit in the personal services exception in §411.357(d)), and the independent contractor’s arrangement with the group practice must comply with the reassignment rules at §424.80(b)(3) of this chapter (see also section 3060.3 of the Medicare Carriers Manual (CMS Pub. 14–3), Part 3—Claims Process, as amended or replaced from time to time). Referrals from an independent contractor who is a physician in the group practice are subject to the prohibition on referrals in §411.353(a), and the group practice is subject to the limitation on billing for those referrals in §411.353(b).

[4] For example, “a group of orthopedic physicians that contract with an independent radiologist to perform the interpretation and reporting of imaging services provided by the group would be precluded from relying upon the

physician services exception if the independent contractor radiologist performed the professional services off-site at a remote location.” Wachler & Dresevic, p. 13 (citing sources).

[5] Gosfield, Stark III, p. 27.





Now let’s turn to the definition of "incident to."




Under 42 CFR s. 410.26,[1] Medicare Part B pays for services “incident to” the service of a physician or other practitioner.  To be considered “incident to,” services and supplies:

(1) must be furnished in a setting other than a hospital or skilled nursing facility;

(2) must be through an integral, though incidental part of the service of the practitioner in the course of a diagnosis or treatment;

(3) must be commonly furnished without charge or included in the bill of the practitioner;

 (4) must be commonly furnished in the office or clinic;

(5) must be furnished under the “direct supervision” of the physician or other practitioner;

(6) must be furnished by the physician, practitioner with an incident to benefit, or auxiliary personnel.



Further, (7) the physician (or other practitioner) may be an employee or independent contractor. 


            Under this rule, the following definitions apply:

·          “Auxiliary personnel” means any individual acting under the supervision of the physician or other practitioner. 


·          “Direct supervision” means the level of supervision defined in 42 CFR s. 410.32(b)(3)(ii), which states that “the physician must be present in the office suite and immediately available to furnish assistance and direction throughout the performance of the procedure. It does not mean that the physician must be present in the room when the procedure is performed.”




·          “Practitioner’ means a non-physician practitioner who is authorized by the Medicare statute to receive payment for services incident to his or her own services.  

·         “Services and supplies” means any services and supplies not separately listed as a separate Medicare benefit.


Again, under 42 CFR 411.355(a)(2), physician services (including “incident to” services) that meet the group practice rule are excluded from the Stark prohibition. Under 42 CFR 411.355(a)(3), “all other ‘incident to’ services (for example, diagnostic tests, physical therapy)” fall outside the exclusion. This means that clinical laboratory and imaging tests (including MRIs, CTs, nuclear imaging tests, PETs and ultrasounds) may not be credited to the physician who has ordered them, but are included in the profit distribution pool for the group.[4] 

[1] According to 42 CFR s. 411.351, “incident to” services means those services that meet the requirements of section 1861(s)(2)(A) of the Act, 42 CFR §410.26, and section 2050 of the Medicare Carriers (CMS Pub. 14–3), Part 3—Claims Process, as amended or replaced from time to time. 


Physical therapy, occupational therapy and speech-language pathology services provided incident to a physician’s professional services are subject to special provisions, which are set forth in 42 CFR §410.59(a)(3)(iii), §410.60(a)(3)(iii), and §410.62(a)(3)(ii).

[3] The latter is known as “personal supervision” (42 CFR s. 410.32(b)(3)(iii). Also distinguishable is “general supervision,” which means :the procedure is furnished under the physician’s overall direction and control, but the physician’s presence is not required during the performance of the procedure. Under general supervision, the training of the nonphysician personnel who actually perform the diagnostic procedure and the maintenance of the necessary equipment and supplies are the continuing responsibility of the physician.” 42 CFR s. 410.32(b)(3)(i).

[4] Alice Godsfield, Stark III: Refinement Not Revolution (Part 1), Family Practice Management 25, 26 (March 2008).


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If you have legal questions concerning self-referral, kickbacks and fee-splitting or patient brokering in New York, California, Massachusetts, Washington DC, and other states, contact  a lawyer who knows the rules.

Consult an experienced  health care law attorney who knows complementary medicine and integrative  medicine for legal advice pertaining to any project involving allied health or CAM     professionals.


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