Under an exception to the physician self-referral law (Stark), hospitals can make payments to induce physicians with needed specialties to relocate into a hospitals geographical service area.(1) These payments often take the form of an income guaranty/loan with a forgiveness period. For example, the hospital enters into a recruitment agreement where the physician is guaranteed a set salary for 36 months through an income guarantee/loan. After this guarantee period, if the physician maintains a practice in the hospitals service area for 36 months, the hospital can forgive the total amount due under the loan over this period of time at the rate of 1/36 per month.
- Can the physician still refer to the recruiting hospital despite the breached contract or would this be a violation of Stark?
- Can the hospital just stop providing the physician remuneration due to the breach of contract?
- What obligation does the hospital have to assure they are compliant with the Stark law?
If the agreement meets Stark standards, a breach by one party does not retrospectively throw the whole agreement out of compliance. For the period following the breach, if the hospital stops any further remuneration to the physician, the hospital can argue there is no further financial relationship and therefore, any referrals from the doctor would not violate Stark on the basis of the failed recruitment agreement. The hospital must clearly stop all post breach remuneration to the physician. Forgiveness of a loan or other financial consideration will likely be considered a form of remuneration. Under this interpretation, the hospital would be required to pursue collection of the debt owed under the recruitment agreement, just as it would pursue any monies owed by patients under the hospitals collection policies.
