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CMS Issues Advisory Opinion on Physician Recruitment Arrangement

Posted in Fraud and Abuse, Medicare

In a recent Stark law Advisory Opinion (CMS-AO-2007-01), the Centers for Medicare and Medicaid Services (CMS) found that a hospital could not change the terms of an existing physician recruitment assistance agreement where that change would effectively result in additional compensation to the recruited physician.  Specifically, the original recruitment assistance agreement between the hospital and the physician included an excess receipts provision which obligated the physician to remit to the hospital any collections in excess of the physicians’ expenses and guaranteed compensation.   

The hospital sought CMS’ opinion on whether (1) an excess receipts provision was required in recruitment assistance agreements by the Stark regulations, and (2) whether the hospital could delete the provision from the existing agreement.  CMS declined to opine on the first issue (although they did note that the recruitment assistance exception does not require such a provision) but found with respect to the second issue that deleting the excess receipts provision would have the effect of providing more compensation to the recruited physician than he would originally have been entitled to.  On this, CMS stated the following:  "Because the Physician has already relocated his medical practice, the additional compensation is not for the purpose of inducing relocation and may directly or indirectly reflect the volume or value of the recruited physician’s actual or potential referrals."