Title: Retention Payments to Non-Employed Physicians
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1 Effective Date: 10/04; Rev. 4/07, 7/08 POLICY: Except as provided in this policy, IHS and its affiliates may not give anything of value, directly or indirectly, to a non-employed physician, a member of a physician s immediate family (as defined below), a physician practice, or other referral source (collectively Providers ) to induce the provider to remain in the community. SCOPE: IHS system wide. All IHS and affiliate facilities including, but not limited to, hospitals, ambulatory surgery centers, home care programs, physician practices, and all IHS and affiliate departments. BACKGROUND: A hospital or federally qualified health center ( FQHC ) may pay a physician a retention payment to induce the physician to keep his/her practice in the community served by the hospital/fqhc if the payments comply with all applicable federal and state laws, including without limitation, Stark II, the Anti-Kickback Statute and tax exemption rules. PROCEDURE: 1. Definitions. 1.1 Disqualified Person. A person who is in a position to exercise substantial influence over the entity. See Policy 1.TX.01, Transactions with Disqualified Persons, 3, for a complete definition. 1.2 Immediate Family. A spouse; natural or adoptive parent, child or sibling; stepparent, stepchild, stepbrother or stepsister; father-in-law, son-in-law or sister-in-law; grandparent or grandchild; and the spouse of a grandparent or grandchild. 2. Requirements. A hospital or FQHC may make payments to a non-employed physician on its medical staff to induce the physician to keep his/her practice in the geographic area served by the hospital/fqhc if all of the following criteria are met: 2.1 There is a demonstrated need for the physician as shown by one of the The physician s current medical practice is located in a rural area or a Healthcare Professional Shortage Area ( HPSA ), as designated by the Page 1 of 5 7/08
2 U.S. Department of Health and Human Services ( HHS ) (regardless of the physician s specialty) or the hospital/fqhc has obtained a favorable advisory opinion from the Secretary of HHS indicating there is a demonstrated need for the physician in the area; or At least 75 percent of the physician s patients reside in a medically underserved area ( MUP ) or are members of a MUP population as determined by HHS. 2.2 The physician has a bona fide opportunity for employment, from a hospital, academic medical center or physician organization that is not related to the hospital or FQHC making the payment, that requires the physician to move the location of his/her practice at least 25 miles and outside of the geographic area served by the hospital/fqhc. Such opportunity for employment must be documented by either: A written offer setting for the financial terms of the offer; or A written certification from the physician setting for all of the Details regarding the steps taken by the physician to obtain the employment opportunity; Details of the physician s employment opportunity, including the identity and location of the physician s future employer or employment location or both, and the anticipate income and benefits (or a range); A statement that the future employer is not related to the hospital/fqhc making the retention payment; The date on which the physician anticipates relocating his or her medical practice outside of the geographic area served by the hospital/fqhc; and Information sufficient for the hospital/fqhc to verify the information in the written certification. 2.3 The hospital/fqhc must take reasonable steps to verify that the physician has a bona fide opportunity for future employment that requires the physician to relocate outside the geographic area served by the hospital. 2.4 Over the term of the agreement, the hospital/fqhc may only pay, as a retention payment, the following amounts: Page 2 of 5 7/08
3 2.4.1 If the physician has a written offer of employment, the hospital/fqhc may say the lower of: The amount obtained by subtracting the physician s current income from physician and related services from the income the physician would receive from physician and related services under the bona fide recruitment offer, provided that the respective incomes are determined using a reasonable and consistent methodology, and that they are calculated uniformly over no more than a 24-month period; or The reasonable cost the hospital/fqhc would otherwise have to expend to recruit a new physician to the geographic area served by the hospital/fqhc in order to join the medical staff of the hospital/fqhc If the physician does not have a written offer, but instead made a written certification as described in Section 2.2.2, the hospital/fqhc may pay the lower of: An amount equal to 25 percent of the physician s current income (measured over no more than a 24-month period), using a reasonable and consistent methodology that is calculated uniformly; or The reasonable costs the hospital/fqhc would otherwise have to expend to recruit a new physician to the geographic area served by the hospital/fqhc in order to join the medical staff of the hospital/fqhc. 2.5 All retention payments must be made directly to the physician, not to the physician s group practice. 2.6 The retention payment must be subject to the same obligations and restrictions, if any, on repayment or forgiveness of indebtedness as the bona fide recruitment offer. 2.7 The retention arrangement must be set out in writing and signed by both the physician and the hospital/fqhc. 2.8 The arrangement cannot be conditioned on the physician s referral of patients to the hospital/fqhc. 2.9 The hospital/fqhc cannot determine, directly or indirectly, the amount of payment to the physician based on the volume or value of any actual or anticipated referrals by the physician. Page 3 of 5 7/08
4 2.10 The physician must be allowed to establish privileges at other hospitals/ FQHCs and to refer business to other entities The hospital/fqhc cannot enter into a retention arrangement with a particular physician more than once every five years, and the amount and terms of the retention payment cannot be altered during the term of the arrangement in a manner that takes into account the value or volume of referrals or other business generated by the physician No purpose of the retention arrangement can be to induce the Provider to refer patients to the hospital/fqhc or order a service or supply paid for by a government healthcare program The retention arrangement does not violate any federal or state law or regulation governing billing or claims submission. 3. Approval. 3.1 All physician retention arrangements must be approved in advance by the affiliate compliance officer and the IHS Law Department. 3.2 If the physician is a Disqualified Person, the transaction must be approved in accordance with Policy 1.TX.01, Transactions with Disqualified Persons. 4. Documentation. The affiliate CEO or designee shall maintain documentation of the 4.1 Evidence that the physician s medical practice is within a primary care HPSA. 4.2 A copy of the physician s offer or certification as described in Section or Calculation of the retention payment as described in Section A copy of the written retention agreement between the physician and the hospital/fqhc. 4.5 All documentation shall be maintained in the Contract Assistant Database. /s/ William B. Leaver Page 4 of 5 7/08
5 William B. Leaver IHS President REFERENCES: 42 C.F.R (t) (2007) Page 5 of 5 7/08
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