CMS Issues Stark Advisory Opinion Stating That Stock Interest In Non-Profit Practice Organization Is Not A Stark Financial Interest

CMS has determined that stock held by physician shareholders in a 700 physician non-profit group medical practice does not constitute a financial interest for purposes of Stark, so that it would not prohibit referrals by the physicians to that group.

The basis of CMS’s decision is that the stock ownership does not constitute a financial interest because out of the lack of any financial attributes, i.e., each physician owns 1 share valued at $1,000 and the interest does not entitle the physicians to any distribute of income, assets or profits. This is a common sense approach to interpreting the Stark Law, which seems to have been lacking for awhile. However, although this ruling is favorable, it does not set any precedential value and, to the extent it provides guidance, it only provides guidance for huge non-profit practice models. The opinion (CMS-AO-2005-08-01) is available on the CMS website.