CMS Stark Law Advisory Opinion No. CMS-AO-2005-08-01

CMS Advisory on Stark Law: Physicians' Stock Ownership

On August 22, 2005, the Centers for Medicare and Medicaid Services (CMS) released its most recent advisory opinion concerning the application of the Stark Law. In it, CMS stated that physicians’ stock ownership in the not-for-profit, tax-exempt medical practice corporation for which they worked did not constitute an ownership or investment financial relationship under the Stark Law, 42 U.S.C. § 1395nn.

The corporation in question employed more than seven hundred physicians in various specialties, many of whom also owned stock in the corporation. The incorporating state’s law permitted individual physicians to own stock in the not-for-profit corporation. Consistent with the corporation’s not-for-profit, tax-exempt status however, the stockholders had no claim to the corporation’s assets, received no dividends on their investments either directly or in the guise of salary, and could realize no appreciation or depreciation of stock value upon resale of the stock.