Recent studies, published in mass media and professional publications alike, warn of a physician shortage expected to worsen progressively during the next 15 years and to peak around 2020. The predicted scope of the national deficit ranges from 85,000 to 200,000 physicians. Analyses of the causes of the shortage conclude that the rate of population growth will exceed growth in the number of physicians, while demand for physician services continues to expand. The projected shortage of physicians is likely to have the greatest effect on underserved and poorer communities that have historically had the most difficulty recruiting and retaining physicians.
In response, hospitals are implementing, expanding, or refining recruitment and retention programs. Practices are increasingly offering part-time work, flex-time, and job-sharing arrangements. In addition to flexible schedules, physician recruitment packages may include sign-on bonuses, relocation allowances, student loan repayment, income guarantees, favorable loans, and other incentives. Additional incentives are available to physicians willing to practice in federally recognized Health Professional Shortage Areas (HPSA) and to those who practice in specialties governed by HPSA regulations, such as family practice, internal medicine, pediatrics, obstetrics and gynecology, oral surgery, mental health, vision care, and podiatry.
These recruiting arrangements are governed by a variety of laws and regulations. Because of the infinite number of factors affecting any given recruitment arrangement, a comprehensive discussion of all the legal implications in recruitment arrangements is beyond the scope of this article. We will, however, provide an overview of three key legal concepts that physicians should consider when evaluating a hospital’s recruiting package. We’ll address recruiting packages offered by medical practices in a later article.
Unless an express exception applies, federal legislation prohibits physicians from making referrals for “designated health services” to entities with which the physician (or an immediate family member) has a “financial relationship.” The law also prohibits entities from submitting claims for services provided in the course of making a prohibited referral.
The Stark legislation broadly defines “financial relationships” as including direct ownership, indirect ownership, investment interests, and compensation arrangements. Similarly, the law broadly defines “designated health services” to include clinical laboratory, physical therapy, occupational therapy, speech pathology, radiology, radiation therapy, home health, and inpatient and outpatient hospital services. “Designated health services” are not limited purely to services rendered and include the provision of radiation therapy supplies, durable medical equipment and supplies, certain nutrients, prosthetics, orthotics, and prescription drugs. A classic example of an arrangement that would violate the Stark legislation is an orthopedic surgeon who refers patients to a physical therapy facility in which he owns a controlling interest.
In general, physicians should be wary of any relationship that involves referring patients to entities in which they have any financial interest, but there are a number of exceptions within the Stark legislation. The Stark law is a strict liability statute; thus, unless an express exception applies, a violation of the statute subjects the provider and entity to liability. For this article, we are concerned with only one of the exceptions, which applies when hospitals and Federally Qualified Health Centers recruit physicians to their geographic service areas.
Specifically, these entities may offer remuneration to induce physicians to relocate and join the medical staff as long as the recruited physicians are not required to refer patients to the facility and provided that the amount of any physician remuneration does not take into account the volume or value of patient referrals. In other words, although the hospital may recruit a physician, it cannot use the recruiting contract to require the physician to make a certain number of referrals or generate a certain amount of revenue.