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Understanding of Legal Compliance Issues is Critical in Physician Recruitment

A Health Care Client Alert

By: E. William S. Shipman


The recruitment of quality physicians, especially for certain practice areas, is critical to the success of hospitals. Physician recruitment is highly regulated and is subject to scrutiny from the Centers for Medicare and Medicaid Services. In general, there are two sets of laws with which hospitals and physicians must comply when entering into physician recruitment arrangements.

First, Stark Law applies generally. There is, however, an exception for physician recruitment. The physician arrangement must be such that the payment is to induce the physician to “relocate” to the hospital’s “geographic area” in order for the physician to be a member of the hospital’s medical staff. In addition, the arrangement (1) must be in writing and signed, (2) cannot be conditioned upon physician referrals to the hospital, (3) cannot take into account the volume or value of referrals by the physician to the hospital, and (4) must permit the physician to obtain privileges at other hospitals.

Second, the arrangement must comply with the intent-based Anti-Kickback statute. The recruitment safe harbor for the Anti-Kickback statute has some similarities to, but is not the same as, the requirements for the Stark Law exception.

Note that failure to comply does not mean that the arrangement is per se illegal, but it does mean that it will be highly scrutinized.

Additionally, hospitals and physicians should understand and consider non-compete provisions in such arrangements.

Bodman can help your organization review and develop agreements and policies that meet your needs and provide practical advice. If you would like to discuss this or any other legal issue affecting your organization, please contact the chair of our Healthcare Law Group, Bill Shipman, at (313) 393-7562 or wshipman@bodmanlaw.com.

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