Stark and Anti-Kickback Laws Regarding Physician Employment and Contractor Agreements
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In this article, the author briefly outlines the legal requirements for paying compensation to a physician-employee and to a physician-independent contractor. This article explains how you pay compensation to a physician employee or contractor in compliance with the referral laws for California and the fed (Stark and Anti-Kickback).
Employee Physicians
In general, under Stark, compensation to an employee-physician is OK if:
1. You have a contract with the physician
2. The contract is for identifiable services
3. The contract pays compensation at FMV
4. The contract doesn’t take into account the volume or value of referrals, and is commercially reasonable even if no referrals are ever made.
A medical practice rarely has Stark issues when it pays its physician employees straight salary or compensation based on an hourly rate.
Productivity payments are a little more difficult. The key concept is that you may pay an employee-physician in a manner that directly correlates to the professional services that the physician personally performs (e.g. the professional component of charges).
Using this key concept, you may pay a physician employee as follows:
*** A percentage of collections for services personally performed by the physician
*** Compensation per unit of service personally performed by the physician (e.g. per relative value unit, patient encounter, or fee schedule)
*** A bonus based on the physician’s personal productivity or the achievement of specified quality indicators
*** For the physician’s own labor in supervising others.
You may not, however, pay an employee-physician for services performed by others or a share in the overall profits of the group, or a facility or department. The primary exception is for a physician in the employ of a group practice; for more on physician compensation in group medical practices, see Stark and Anti-Kickback laws re the compensation structure of a group medical practice.
Contractor Physicians
In general, under Stark, you may pay an independent contractor physician if:
1. You have a contract with the physician
2. The contract specifies and encompasses all of the services that the physician will provide, and the aggregate services are reasonable and necessary for legitimate business purposes
3. The contract has a term of at least one year
4. Compensation does not exceed FMV
5. The contract sets compensation in sufficient detail so that it can be verified (“set in advance”)
6. As always, the contract may not take into account the volume or value of any referrals or any other business generated between the parties.
Just as for employee-physicians, you may pay to a contractor a percentage of collections or productivity bonus, but only for services performed personally by the physician, not for services provided by someone else. See the discussion above re employee-physicians for more on this concept.
You can base compensation on a formula (e.g. a percentage of collections) so long as the formula is set in advance in the contract. [Note that to fit within its safe-harbor, the Anti-Kickback law requires that the contract state the total, aggregate compensation payable to the physician, hence you may not use a formula under the Kickback safe harbor.]
We've suffered enough. The referral laws are voluminous, complex, subtle and idiotic. Get competent legal help for your group practice's compensation plan.
ABOUT THE AUTHOR: Matt Dickstein, Business Attorney
Matt Dickstein, Business Attorney, provides business legal services in Northern and Southern California, including the San Francisco Bay Area, San Jose, Sacramento, Los Angeles and San Diego.
Since 1994, I have been representing businesses of all types, big and small. I handle business transactions, corporations & LLCs, real estate ventures, professional practices, and franchises.
Copyright Matt Dickstein, Business Attorney - Google+
More information about Matt Dickstein, Business Attorney
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
In general, under Stark, compensation to an employee-physician is OK if:
1. You have a contract with the physician
2. The contract is for identifiable services
3. The contract pays compensation at FMV
4. The contract doesn’t take into account the volume or value of referrals, and is commercially reasonable even if no referrals are ever made.
A medical practice rarely has Stark issues when it pays its physician employees straight salary or compensation based on an hourly rate.
Productivity payments are a little more difficult. The key concept is that you may pay an employee-physician in a manner that directly correlates to the professional services that the physician personally performs (e.g. the professional component of charges).
Using this key concept, you may pay a physician employee as follows:
*** A percentage of collections for services personally performed by the physician
*** Compensation per unit of service personally performed by the physician (e.g. per relative value unit, patient encounter, or fee schedule)
*** A bonus based on the physician’s personal productivity or the achievement of specified quality indicators
*** For the physician’s own labor in supervising others.
You may not, however, pay an employee-physician for services performed by others or a share in the overall profits of the group, or a facility or department. The primary exception is for a physician in the employ of a group practice; for more on physician compensation in group medical practices, see Stark and Anti-Kickback laws re the compensation structure of a group medical practice.
Contractor Physicians
In general, under Stark, you may pay an independent contractor physician if:
1. You have a contract with the physician
2. The contract specifies and encompasses all of the services that the physician will provide, and the aggregate services are reasonable and necessary for legitimate business purposes
3. The contract has a term of at least one year
4. Compensation does not exceed FMV
5. The contract sets compensation in sufficient detail so that it can be verified (“set in advance”)
6. As always, the contract may not take into account the volume or value of any referrals or any other business generated between the parties.
Just as for employee-physicians, you may pay to a contractor a percentage of collections or productivity bonus, but only for services performed personally by the physician, not for services provided by someone else. See the discussion above re employee-physicians for more on this concept.
You can base compensation on a formula (e.g. a percentage of collections) so long as the formula is set in advance in the contract. [Note that to fit within its safe-harbor, the Anti-Kickback law requires that the contract state the total, aggregate compensation payable to the physician, hence you may not use a formula under the Kickback safe harbor.]
We've suffered enough. The referral laws are voluminous, complex, subtle and idiotic. Get competent legal help for your group practice's compensation plan.
ABOUT THE AUTHOR: Matt Dickstein, Business Attorney
Matt Dickstein, Business Attorney, provides business legal services in Northern and Southern California, including the San Francisco Bay Area, San Jose, Sacramento, Los Angeles and San Diego.
Since 1994, I have been representing businesses of all types, big and small. I handle business transactions, corporations & LLCs, real estate ventures, professional practices, and franchises.
Copyright Matt Dickstein, Business Attorney - Google+
More information about Matt Dickstein, Business Attorney
View all articles published by Matt Dickstein, Business Attorney
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
