Stark II exceptions for physician recruitment by hospitals

Contract Language. By Steven M. Harris, AMNews contributor. Aug. 2, 2004.

CONTRACT LANGUAGE

A column examining the ins and outs of contract issues

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The second phase of the updated Stark II regulations became effective July 26, and the government has indicated that it will focus its enforcement efforts on ensuring physician recruitment arrangements comply with the new regulations.

Stark II contains an exception for payments by a hospital to recruit physicians to relocate to the geographic area served by the hospital and to join the hospital's medical staff. Under the Stark II physician recruitment exception, a physician has relocated his or her practice to the hospital's geographic area if the physician has moved the site of the practice a minimum of 25 miles, or at least 75% of the physician's revenues (including services provided to hospital inpatients) are from services provided to new patients whom the physician did not treat at the old location.

The regulations define "geographic area" served by the hospital as the area composed of the lowest number of contiguous postal ZIP codes from which the hospital draws at least 75% of its inpatients.

Regarding their impact on existing and future physician recruitment agreements with hospitals, the new Stark II regulations:

• Focus on relocation of the recruited physician's medical practice rather than the physician's residence.
• Permit crosstown recruitment of physicians (including resident physicians) who have been in medical practice less than one year without regard to any change in the location of their practice.
• Permit recruitment by federally qualified health centers in addition to hospitals. Physician recruitment exception is not extended to designated health service entities, such as home health agencies or nursing homes.