CMS Amends Stark Recruitment Exception to Include Primary Care Ancillary Providers

Hospital-physician recruitment agreements provide a source of financing for private medical groups to bring an additional physician on staff, reducing the economic risk of making a new hire. They serve the public interest by encouraging physicians to relocate to medically underserved areas and health professional shortage areas. The need for primary care providers in these areas is especially great. Yet, more and more, primary care is being delivered by ancillary providers, particularly physician assistants and nurse practitioners.
 
In its Proposed Rule from July of last year, CMS acknowledged that there have been drastic changes to the primary care workforce and the delivery of primary care services throughout the United States. As such, CMS proposed a limited exception for hospitals, federally qualified health centers ("FQHCs") and rural health clinics ("RHCs") to provide remuneration to physicians who want to recruit a non-physician practitioner ("NPP"). CMS previously declined to expand the physician recruitment exception to NPPs during the regulations promulgated in Phase III of the Stark Law. But CMS has now determined that this extension of the exception is appropriate for certain employed and independent contractor physician-NPP arrangements in light of health care and primary care workforce shortage projections.

In the Final Rule, CMS made several modifications to the version of the NPP exception that it included in the Proposed Rule. The Final Rule’s definition of NPP is broader than the one originally proposed, covering any NPP who furnishes substantially all primary care services or mental health care services to patients of the physician's practice. As such, covered NPPs include clinical social workers, clinical psychologists, physician assistants, nurse practitioners, clinical nurse specialists and certified nurse midwives.

Prior to the new exception, hospitals, FQHCs, and RHCs could offer recruitment assistance to physicians only for the recruitment and retention of physicians into their geographic service areas.

To be protected under the exception, the recruitment arrangement must satisfy these conditions:

     1.  It must be in writing and signed by the hospital, the physician, and the NPP.

     2.  It cannot be conditioned on the physician’s or the NPP’s referrals to the hospital.

     3.  The remuneration from the hospital cannot exceed 50 percent of the actual compensation, signing bonus, and benefits paid by the physician to the NPP (which compensation must meet the fair market value requirement common to the Stark Law).

     4.  The remuneration from the hospital can only be paid during the first two consecutive years of the compensation arrangement between the physician and the NPP.

     5.  The remuneration from the hospital cannot be determined in a way that takes into account the volume or value of actual or anticipated referrals by the physician (or any physicians in that practice), the NPP (or any NPP in the practice), or any other business generated between the parties.

     6.   The NPP cannot have, within one year of the commencement of the NPP’s compensation arrangement, practiced in the geographic area serviced by the hospital or been otherwise employed or engaged to provide patient care services by a physician or physician organization that has a medical practice site located in the geographic area served by the hospital (whether or not the NPP actually furnished services at that site within the geographic area).

     7.  Substantially all (that is, at least 75%) of the patient care services that the NPP furnishes to the physician’s practice must be primary care services or mental health care services.

     8.  The physician cannot impose practice restrictions on the NPP that unreasonably restrict the NPP’s ability to practice in the geographic area.

     9.  Records of the amount of remuneration by the hospital to the physician, and by the physician to the NPP, must be maintained for at least six years.

The exception may be used by a hospital, FQHC, or RHC only once every three years with respect to the same referring physician. However, this three-year limitation does not apply where an NPP is replacing an NPP who terminated his or her employment or contractual arrangement within one year of its commencement, and the remuneration provided to the physician is provided during a period that does not exceed two consecutive years from the commencement of that employment or contractual arrangement.

CMS expanded the definition of a compensation arrangement to include independent contractors, employees, and "other" arrangements. Thus, the NPP need not be a bona fide employee, as specified in the proposed rule.

However, regardless of whether the NPP is an employee or an independent contractor, the compensation arrangement must be directly between the physician (or physician organization) and the NPP. This requirement would prohibit, among other things, staffing services from holding the contract.