| In general, two of the primary laws that are applicable | | | | anti-kickback statute and must comply with all relevant |
| to recruitment arrangements are: (1) the Federal | | | | billing laws and regulations. |
| “Stark” law; and (2) the Federal Anti-kickback | | | | FEDERAL ANTI-KICKBACK LAW AND SAFE |
| law and the accompanying safe harbor for physician | | | | HARBOR |
| recruitment. | | | | Under the Federal Anti-kickback law, a person is |
| FEDERAL STARK –PHSYICIAN RECRUTIMENT | | | | prohibited from knowingly and willfully soliciting or |
| EXCEPTION | | | | receiving, offering or paying any remuneration in return |
| The Federal Stark law prohibits a physician from | | | | for referring or inducing referrals for goods and |
| making a referral to an entity for the furnishing of | | | | services paid for under federal government programs. |
| “designated health services” (“DHS”) and | | | | However, there is a regulatory safe harbor that |
| the entity from submitting a claim for the service if | | | | protects physician recruitment payments. Of note, |
| there is a financial relationship between the physician | | | | however, is that unlike Stark, the Federal Anti-kickback |
| and the DHS entity, unless an exception exists. An | | | | safe harbor applies to recruitment payments to induce |
| exception exists for physician recruitment. Under | | | | recruitment into a health care professional shortage |
| Stark, a hospital is permitted to pay a physician to | | | | area (“HPSA”). The safe harbor does not |
| relocate to the hospital’s geographic area in order | | | | protect recruitment payments in connection with |
| for the physician to be a member of the hospital’s | | | | recruitment into areas that are not designated as |
| medical staff. | | | | HPSAs. The recruitment safe harbor applies to |
| Specifically, the recruitment arrangement must meet | | | | payments by an entity in order to induce a practitioner |
| the following requirements | | | | who has been practicing within his or her current |
| (1) The arrangement is set out in writing and signed | | | | specialty for less than one year to locate, or to induce |
| by both parties; | | | | any other practitioner to relocate, his or her primary |
| (2) The arrangement cannot be conditioned on the | | | | place of practice into a HPSA for his or her specialty |
| physician’s referrals; | | | | area that is served by the entity, as long as the |
| (3) The amount of remuneration under the | | | | following requirements are met: |
| agreement may not be determined in a manner that | | | | - The arrangement is set forth in a written agreement |
| takes into account (directly or indirectly) the volume or | | | | signed by the parties that specifies the benefits |
| value of any referrals by the physician; and | | | | provided by the entity, the terms under which the |
| (4) The physician must be allowed to establish staff | | | | benefits are to be provided, and the obligation of each |
| privileges at any other hospital and to refer business to | | | | party. |
| other entities. | | | | - If a practitioner is leaving an established practice, at |
| Relocation: | | | | least 75 percent of the revenues of the new practice |
| A hospital is permitted to pay a physician to relocate | | | | must be generated from new patients not previously |
| to the hospital’s geographic area. In order to meet | | | | seen by the practitioner at his or her former practice. |
| the relocation requirement, the physician must: | | | | - The benefits are provided by the entity for a period |
| (1) Relocate his/ her practice a minimum of | | | | not in excess of 3 years, and the terms of the |
| twenty-five (25) miles; or | | | | agreement are not renegotiated during this 3-year |
| (2) At least seventy-five percent (75%) of the | | | | period in any substantial aspect; provided, however, |
| physician’s revenues must come from care | | | | that if the HPSA to which the practitioner was |
| provided to new patients. | | | | recruited ceases to be a HPSA during the term of the |
| Note, however, the Stark regulations afford special | | | | written agreement, the payments made under the |
| treatment to residents and new physicians (physicians | | | | written agreement will continue to satisfy this |
| who have been in practice less than one year). | | | | paragraph for the duration of the written agreement |
| These physicians will be eligible for the physician | | | | (not to exceed 3 years). |
| recruitment exception regardless of whether they | | | | - There is no requirement that the practitioner make |
| actually move their practices. | | | | referrals to, be in a position to make or influence |
| Geographic Area: | | | | referrals to, or otherwise generate business for the |
| With regard to the geographic area, the regulations | | | | entity as a condition for receiving the benefits; |
| define the geographic area served by the hospital as | | | | provided, however, that for purpose of this paragraph, |
| the area composed of the lowest number of | | | | the entity may require as a condition for receiving |
| contiguous zip codes from which the hospital draws at | | | | benefits that the practitioner maintain staff privileges at |
| least 75% of its inpatients. The geographic area | | | | the entity. |
| requirement dictates both the area from which the | | | | - The practitioner is not restricted from establishing |
| hospital may not recruit established physicians, and also | | | | staff privileges at, referring any service to, or |
| as an area within which the recruited physician must | | | | otherwise generating any business for any other entity |
| relocate his/her practice. | | | | of his or her choosing. |
| Payments Made to a Physician Who Joins a Group: | | | | - The amount or value of the benefits provided by the |
| The Stark regulations add additional conditions when a | | | | entity may not vary (or be adjusted or renegotiated) in |
| recruitment payment is made (1) indirectly through | | | | any manner based on the volume or value of any |
| another physician or group practice or (2) directly to a | | | | expected referrals to or business otherwise generated |
| physician who is joining an existing physician or group | | | | for the entity by the practitioner for which payment |
| practice. To meet these additional conditions, the | | | | may be made in whole or in party under Medicare, |
| following requirements must be met: | | | | Medicaid or nay other Federal health care programs. |
| (1) The arrangement between the hospital and | | | | - The practitioner agrees to treat patients receiving |
| physician practice is in writing and signed by the parties: | | | | medical benefits or assistance under any Federal |
| in a situation where a physician joins a host practice, | | | | health care program in a nondiscriminatory manner. |
| the recruitment contract will be a three- party | | | | - At least 75 percent of the revenues of the new |
| agreement signed by the hospital, recruited physician | | | | practice must be generated from patients residing in a |
| and host PC or PLLC; | | | | HPSA or a Medically Underserved Area (MUA) or |
| (2) The remuneration is passed directly through to, | | | | who part of a Medically Underserved Population |
| or remains with, the recruited physician (except for | | | | (MUP), all are as defined in paragraph (a) of this |
| actual costs incurred by the practice in recruiting the | | | | section. |
| new physician); | | | | - The payment or exchange of anything of value may |
| (3) In the case of an income guarantee made by | | | | not directly or indirectly benefit any person (other than |
| the hospital to a physician who joins a local physician | | | | the practitioner being recruited) or entity in a position to |
| practice, costs allocated by the physician practice to | | | | make or influence referrals to the entity providing the |
| the recruited physician may not exceed the actual | | | | recruitment payments or benefits of items or services |
| additional incremental costs to the practice attributable | | | | payable by a Federal health care program. |
| to the recruited physician; | | | | Notably, the Anti-kickback statute is an intent based |
| (4) The new physician must establish a medical | | | | statue, which is broadly worded and has been |
| practice in the hospital’s geographic area and join | | | | interpreted to include any arrangement, one purpose of |
| the hospital’s medical staff; | | | | which is to induce referrals. The safe harbor |
| (5) The practice’s arrangement with the | | | | regulations define practices that are not subject to the |
| recruited physician must be set out in writing and | | | | Anti-kickback statute but failure to comply with a safe |
| signed by the parties; | | | | harbor, does not make an arrangement per se illegal. |
| (6) The new physician may not be required to | | | | Instead, the particular facts and circumstances |
| refer patients to the hospital and is allowed to establish | | | | surrounding the arrangement must be carefully |
| staff privileges at any other hospital and to refer | | | | scrutinized. In this regard, although there is not a safe |
| business to other entities; | | | | harbor that applies to recruitment payments outside of |
| (7) The remuneration from the hospital is not | | | | the HPSA context, it may reduce risk if all of the other |
| determined in any manner that takes into account | | | | requirements of the safe harbor, which do not involve |
| (directly or indirectly) the volume or value of any | | | | HPSA issues, are met. |
| referrals (actual or anticipated) by the recruited | | | | Summary |
| physician or by the physician practice receiving the | | | | Physicians involved in recruitment arrangements must |
| direct payments from the hospital (or any physician | | | | be mindful of the complex legal requirements. |
| affiliated with that physician practice; | | | | Violations of the Stark and the Anti-kickback law are |
| (8) The physician practice receiving the hospital | | | | severe. Any physician contemplating entering into a |
| payments may not impose additional practice | | | | recruitment arrangement should seek the advice of |
| restrictions on the recruited physician (e.g., a covenant | | | | experienced counsel to ensure that the laws are |
| not to compete), but may impose conditions related | | | | complied with and in order to obtain protections in the |
| solely to quality considerations; and | | | | agreements should the physician be terminated. |
| (9) The arrangement must not violate the | | | | |