September 24, 2015

QUESTION:        One of the few remaining independent physician groups whose physicians are members of our medical staff desperately needs help. They have been unable to find a physician who is willing to relocate, but have found several qualified non-physician practitioners who are. The group has approached the hospital requesting the same type of net income guarantee recruitment assistance agreement that the hospital would offer to the group if they had located a physician. Since it will be less costly to provide the recruitment assistance needed to recruit a non-physician practitioner, this seems like a simple decision. However, our attorney is telling us that the proposed arrangement violates the Stark law. How?

ANSWER:          Unfortunately, your legal counsel is correct. The Stark law only applies to physicians. A PA, CRNP, CRNA, or other non-physician practitioner (“NP”) is not a “physician” as defined by the Stark law. So the Stark law would not apply to a direct compensation arrangement between the NP and the hospital.

However, that is of little practical benefit if the request is for an income guarantee. By definition, the hospital must, directly or indirectly, pay the guarantee payment to the physician group. This creates a compensation arrangement between the hospital and the group and so in order to comply with the Stark law, this arrangement must satisfy an exception. Unfortunately, in the Preamble to the Stark Phase 3 Rules, in response to a comment asking whether recruitment assistance could be provided to a group to recruit an NP, CMS responded by stating that the physician recruitment exception is limited to the recruitment of a physician. CMS then stated that any recruitment payments made by a hospital to a physician group to assist the group to recruit an NP would constitute a compensation arrangement “to which no exception would apply.”

We have never understood CMS’s position and now it appears that CMS has seen the error of its ways. In the July 15, 2015 Federal Register, CMS proposed creating a new exception to the Stark law that would specifically permit a hospital to provide recruitment assistance to a physician group to employ an NP.

While a positive step, there are a number of concerns with the proposed exception. As proposed, the new exception is much more limited than the physician recruitment exception. For example, it limits the exception to PAs, CRNPs and certified nurse midwives who are employed by a physician group to provide primary care services. It also limits the type of recruitment assistance that may be provided.

In comments that we submitted to CMS, we requested that CMS revise this exception to make it less restrictive and more in line with the physician recruitment exception. Whether CMS will agree with our comments remains to be seen when it publishes final regulations.

Therefore, the safest course of action right now is to provide the recruitment assistance directly to the NP. However, current law does not permit a guarantee-type arrangement with a physician group to recruit an NP. As a result, we have found the types of recruitment assistance that are currently permitted to be used with an NP to be very limited. If you have the luxury of time, a better approach would be to wait and see if CMS publishes the proposed NP recruitment exception in final form and then follow that exception.

The $115,000,000 settlement described in the “Your Government at Work” section of this week’s HLE was, for the most part, due to the compensation paid to employed physicians. Want to learn more about the types of compensation that can be paid to employed physicians? Join Henry, Rachel and Charlie in Las Vegas on October 15-17 at the Physician Employment Institute.