TITLE 42--PUBLIC HEALTH
CHAPTER IV--CENTERS FOR MEDICARE
& MEDICAID SERVICES,
DEPARTMENT OF HEALTH AND
HUMAN SERVICES
PART 411_EXCLUSIONS FROM MEDICARE AND LIMITATIONS ON MEDICARE PAYMENT
--Table of Contents
Subpart J_Financial Relationships Between Physicians and Entities
Furnishing Designated Health Services
Sec. 411.352 Group practice.
For purposes of this subpart, a group practice is a physician
practice that meets the following conditions:
(a) Single legal entity. The group practice must consist of a
single legal entity operating primarily for the purpose of being a
physician group practice in any organizational form recognized by the
State in which the group practice achieves its legal status, including,
but not limited to, a partnership, professional corporation, limited
liability company, foundation, nonprofit corporation, faculty practice
plan, or similar association. The single legal entity may be organized
by any party or parties, including, but not limited to, physicians,
health care facilities, or other persons or entities (including, but
not limited to, physicians individually incorporated as professional
corporations). The single legal entity may be organized or owned (in
whole or in part) by another medical practice, provided that the other
medical practice is not an operating physician practice (and regardless
of whether the medical practice meets the conditions for a group
practice under this section). For purposes of this subpart, a single
legal entity does not include informal affiliations of physicians
formed substantially to share profits from referrals, or separate group
practices under common ownership or control through a physician
practice management company, hospital, health system, or other entity
or organization. A group practice that is otherwise a single legal
entity may itself own subsidiary entities. A group practice operating
in more than one State will be considered to be a single legal entity
notwithstanding that it is composed of multiple legal entities,
provided that--
(1) The States in which the group practice is operating are
contiguous (although each State need not be contiguous to every other
State);
(2) The legal entities are absolutely identical as to ownership,
governance, and operation; and
(3) Organization of the group practice into multiple entities is
necessary to comply with jurisdictional licensing laws of the States in
which the group practice operates.
(b) Physicians. The group practice must have at least two
physicians who are members of the group (whether employees or direct or
indirect owners), as defined at Sec. 411.351.
(c) Range of care. Each physician who is a member of the group, as
defined at Sec. 411.351, must furnish substantially the full range of
patient care services that the physician routinely furnishes, including
medical care, consultation, diagnosis, and treatment, through the joint
use of shared office space, facilities, equipment, and personnel.
(d) Services furnished by group practice members. (1) Except as
otherwise provided in paragraphs (d)(3), (d)(4), (d)(5), and (d)(6) of
this section, substantially all of the patient care services of the
physicians who are members of the group (that is, at least
75 percent of the total patient care services of the group practice
members) must be furnished through the group and billed under a billing
number assigned to the group, and the amounts received must be treated
as receipts of the group. Patient care services must be measured by one
of the following:
(i) The total time each member spends on patient care services
documented by any reasonable means (including, but not limited to, time
cards, appointment schedules, or personal diaries). (For example, if a
physician practices 40 hours a week and spends 30 hours a week on
patient care services for a group practice, the physician has spent 75
percent of his or her time providing patient care services for the
group.)
(ii) Any alternative measure that is reasonable, fixed in advance
of the performance of the services being measured, uniformly applied
over time, verifiable, and documented.
(2) The data used to calculate compliance with this substantially
all test and related supportive documentation must be made available to
the Secretary upon request.
(3) The substantially all test set forth in paragraph (d)(1) of
this section does not apply to any group practice that is located
solely in a HPSA, as defined at Sec. 411.351.
(4) For a group practice located outside of a HPSA (as defined at
Sec. 411.351), any time spent by a group practice member providing
services in a HPSA should not be used to calculate whether the group
practice has met the substantially all test, regardless of whether the
member's time in the HPSA is spent in a group practice, clinic, or
office setting.
(5) During the start up period (not to exceed 12 months) that
begins on the date of the initial formation of a new group practice, a
group practice must make a reasonable, good faith effort to ensure that
the group practice complies with the substantially all test requirement
set forth in paragraph (d)(1) of this section as soon as practicable,
but no later than 12 months from the date of the initial formation of
the group practice. This paragraph (d)(5) does not apply when an
existing group practice admits a new member or reorganizes.
(6)(i) If the addition to an existing group practice of a new
member who would be considered to have relocated his or her medical
practice under Sec. 411.357(e)(2) would result in the existing group
practice not meeting the substantially all test set forth in paragraph
(d)(1) of this section, the group practice will have 12 months
following the addition of the new member to come back into full
compliance, provided that--
(A) For the 12-month period the group practice is fully compliant
with the substantially all test if the new member is not counted as a
member of the group for purposes of Sec. 411.352; and
(B) The new member's employment with, or ownership interest in, the
group practice is documented in writing no later than the beginning of
his or her new employment, ownership, or investment.
(ii) This paragraph (d)(6) does not apply when an existing group
practice reorganizes or admits a new member who is not relocating his
or her medical practice.
(e) Distribution of expenses and income. The overhead expenses of,
and income from, the practice must be distributed according to methods
that are determined before the receipt of payment for the services
giving rise to the overhead expense or producing the income. Nothing in
this section prevents a group practice from adjusting its compensation
methodology prospectively, subject to restrictions on the distribution
of revenue from DHS under Sec. 411.352(i).
(f) Unified business. (1) The group practice must be a unified
business having at least the following features:
(i) Centralized decision-making by a body representative of the
group practice that maintains effective control over the group's assets
and liabilities (including, but not limited to, budgets, compensation,
and salaries); and
(ii) Consolidated billing, accounting, and financial reporting.
(2) Location and specialty-based compensation practices are
permitted with respect to revenues derived from services that are not
DHS and may be permitted with respect to revenues derived from DHS
under Sec. 411.352(i).
(g) Volume or value of referrals. No physician who is a member of
the group practice directly or indirectly receives compensation based
on the volume or value of his or her referrals, except as provided in
Sec. 411.352(i).
(h) Physician-patient encounters. Members of the group must
personally conduct no less than 75 percent of the physician-patient
encounters of the group practice.
(i) Special rule for productivity bonuses and profit shares. (1) A
physician in the group practice may be paid a share of overall profits
of the group, provided that the share is not determined in any manner
that is directly related to the volume or value of referrals of DHS by
the physician. A physician in the group practice may be paid a
productivity bonus based on services that he or she has personally
performed, or services ``incident to'' such personally performed
services, or both, provided that the bonus is not determined in any
manner that is directly related to the volume or value of referrals of
DHS by the physician (except that the bonus may directly relate to the
volume or value of DHS referrals by the physician if the referrals are
for services ``incident to'' the physician's personally performed
services).
(2) Overall profits means the group's entire profits derived from
DHS payable by Medicare or Medicaid or the profits derived from DHS
payable by Medicare or Medicaid of any component of the group practice
that consists of at least five physicians. Overall profits should be
divided in a reasonable and verifiable manner that is not directly
related to the volume or value of the physician's referrals of DHS. The
share of overall profits will be deemed not to relate directly to the
volume or value of referrals if one of the following conditions is met:
(i) The group's profits are divided per capita (for example, per
member of the group or per physician in the group).
(ii) Revenues derived from DHS are distributed based on the
distribution of the group practice's revenues attributed to services
that are not DHS payable by any Federal health care program or private
payer.
(iii) Revenues derived from DHS constitute less than 5 percent of
the group practice's total revenues, and the allocated portion of those
revenues to each physician in the group practice constitutes 5 percent
or less of his or her total compensation from the group.
(3) A productivity bonus must be calculated in a reasonable and
verifiable manner that is not directly related to the volume or value
of the physician's referrals of DHS. A productivity bonus will be
deemed not to relate directly to the volume or value of referrals of
DHS if one of the following conditions is met:
(i) The bonus is based on the physician's total patient encounters
or relative value units (RVUs). (The methodology for establishing RVUs
is set forth in Sec. 414.22 of this chapter.)
(ii) The bonus is based on the allocation of the physician's
compensation attributable to services that are not DHS payable by any
Federal health care program or private payer.
(iii) Revenues derived from DHS are less than 5 percent of the
group practice's total revenues, and the allocated portion of those
revenues to each physician in the group practice constitutes 5 percent
or less of his or her total compensation from the group practice.
(4) Supporting documentation verifying the method used to calculate
the profit share or productivity bonus under paragraphs (i)(2) and
(i)(3) of this section, and the resulting amount of compensation, must
be made available to the Secretary upon request.