15th Annual Cardiovascular & Medicine Symposium St. Augustine, Florida – May 15, 2014

15th Annual Cardiovascular& Medicine Symposium

St. Augustine, Florida – May 15, 2014 Rick M. Reznicsek, EsquireRezLegal, LLC4230 Pablo Professional Court, Suite 200Jacksonville, Florida 32224Telephone: (904) 567-1179Facsimile: (904) 567-1066Email: [email protected]

Physician Compensationin Private Practice

vs.Hospital Employment

The Impact of the Federal Stark Lawand

Florida Law

The Impact of the Federal Stark Law & Florida Law

STARK LAW

A Physician having an ownership interest in, or financial relationship with an entity may not make a referral to the entity for furnishing Designated Health Services reimbursable by Medicare of Medicaid.


Penalties: Denial of payment $15,000 per service Exclusion from Medicare and Medicaid $100,000 for entering into a “circumvention scheme” Violation of False Claims Act

Treble damages


Ownership: Stock, units, percentage interest, etc. Secured debt

Unsecured debt is considered compensation


Financial Arrangement: Employment Independent contractor Anything of value (tickets, meals)

$300 non-cash exception

Referral: Request, ordering, certification for the establishment

of a plan of care, including the request for a consult and the tests or procedures derived from that consult


DHS: Clinical lab Physical therapy Radiology (including MRI, CT, ultrasound) DME Home health Prosthetics, orthotics Outpatient prescription drugs Inpatient and outpatient hospital services Radiation therapy


Florida Law: Covers DHS plus any other health care item or service Not limited to Medicare/Medicaid

Stark Exceptions: Ownership and compensation exceptions

Physician services (personally performed) In-Office ancillary Nuclear medicine Cardiac catheterization Lithotripsy


Ownership exceptions Publicly traded securities

Compensation Exceptions Office space lease Equipment lease Employees Personal service arrangements Physician recruitment Fair Market Value compensation Non-monetary gifts/compensation up to $300


Halifax Hospital Case – November 2013: 6 employed physicians – medical oncologists

[employed through hospital subsidiary] Base compensation plus bonus Bonus is a pool shared by the 6 physicians

Pool is 15% of the profit for the Medical Oncology Program

• Medical Oncology Program consists of professional fees (from physician services) plus outpatient oncology pharmacy charges plus outpatient services not performed by the physicians


Halifax Hospital Case – November 2013 (cont’d): Court

The physicians participated in the profits generated from their referrals for prescriptions and work performed by others

The employment exception to the Stark Law prohibits compensation based on the volume or value of referrals

The incentive bonus was not based solely on “services personally performed”

This arrangement violates the Stark Law


Tuomey Hospital Case – May 8, 2013: Jury verdict

21,000 improper claims totaling $39 million Per US Government, minimum recovery is $237

million (max of $357 million) CEO, VP and law firm have all resigned Settlement discussions ongoing


Tuomey Hospital Case – May 8, 2013 (cont’d): Gastroenterology physicians considering performing

outpatient surgical procedures in their offices and not at Hospital

Other specialists said “us too” Hospital signed contracts with 19 doctors

Required physicians to provide outpatient procedures exclusively at hospital (or hospital ASC)

The 19 physicians were part-time employees of hospital only when they performed outpatient procedures at the hospital


Tuomey Hospital Case – May 8, 2013 (cont’d): Compensation to physicians: base salary plus bonus

Bonus = 80% of collections, from both professional fees and facility fee (technical component)

Jury determined this arrangement violated Stark; did not meet employment exception Payment of a portion of the facility fee to doctor is

inappropriate


Net result of Tuomey and Halifax: Employed physicians of a hospital system cannot

share in any DHS ancillary revenues What if the ancillary revenues were generated

within the physician offices (ultrasound)? Can the in-office ancillary exception be applied to

physicians employed by a hospital-owned subsidiary?

Language from the Halifax court indicates not (bonuses were not based solely on “services personally performed”)


Net result of Tuomey and Halifax (cont’d): Does this reasoning extend to non-hospital

employees? Private equity Publicly traded (Sheridan, Mednax)


Private Practice - Physician owned In-office ancillary services exception Applies to group practice Physicians in the group practice can share in the profit

generated by DHS


Private Practice - Physician owned (cont’d) Acceptable distribution methods:

Even split Split based on ownership % (based on investment) Number of hours worked Seniority Generation of non-DHS revenue or RVUs Other methods not directly related to the volume

or value of the physician’s referrals for DHS


Private Practice - Physician owned (cont’d) Not acceptable distribution methods:

Based on number of patients sent for DHS Based on revenue of DHS referred Any method that considers the volume or value of

DHS referrals


Profits from non-DHS have no restrictions under Stark

But… State Laws have impact. Florida Anti-Fee Splitting Law

It is impermissible to pay or receive any commission, bonus, kickback or rebate, or engage in any split fee arrangement, either directly or indirectly, for patients referred to providers of health care goods and services


Crow case Physician sold his practice to an HMO Physician employed by the HMO Physician owns no interest in the HMO Physician compensation based on total revenues

generated by physician for the HMO Including laboratory, radiology, diagnostic testing

Court Bonuses may not be paid for patient referrals.

Therefore it is inappropriate to pay employed physician a bonus based on ancillary revenues generated by the physician.


Bottom line Sharing in ancillary revenues

Hospital Employee Private Practice

• No sharing DHS • Owners can share in DHS and non-DHS

15th Annual Cardiovascular & Medicine Symposium St. Augustine, Florida – May 15, 2014

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