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Hospital & Physician Agreements, Recruitment, Compensation & Incentive Arrangements

Freedom of contract does not exist in healthcare; physician and other healthcare professional agreements and compensation structures are complicated by the application of federal healthcare laws. Negotiation and drafting of physician and other healthcare professional agreements and compensation structures must not only address the typical terms and conditions of an employment or independent contractor arrangement, such as the term of the contract, the duties expected, the ability to terminate the contract, and the compensation and benefits to be paid, but it must ensure that the negotiated terms are legal. The Anti-Kickback Law, which prohibits the knowing offer, payment, solicitation, or receipt of anything of value in order to induce referrals, requires an analysis that a physician or other healthcare professional is being paid fair market value. Anything additional could be considered payment for referrals. Likewise, the Stark Law, which prohibits a physician from making a referral for designated healthcare services payable by Medicare or Medicaid to an entity in which it has a financial relationship, requires careful structuring of physician contracts to comply with one of several enumerated exceptions.  

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Other bargained-for terms of employment may be affected by healthcare laws as well. For instance, non-compete provisions must be carefully considered and structured to comply with the laws of that applicable state. When it comes to healthcare professionals, the enforceability of non-compete provisions varies from state to state and the duration, geographical area restricted, and the scope of restricted activities, are all critical to its enforceability.

Compensation within a physician group practice also raises special considerations. The Stark Law prohibits referrals for designated health services among physicians in a physician practice unless the practice is properly structured to comply with a safe harbor. The most common Stark Law exceptions utilized by physician practices are for physician services and in-office ancillary services. The exceptions have their own unique requirements but both require that the practice qualify as a “group practice” as defined in the Stark Law. The group practice regulations include, among other things, specific rules for how expenses and income are distributed within the group practice and how physicians within the group are compensated. Failure to comply with the group practice regulations may result in a Stark Law violation. Stark Law violations may give rise to False Claims Act liability, for which qui tam (whistleblower) cases can be brought. In other words, compliance is critical to protect a group practice from potentially devastating liability.

MacDonald Illig has expertise in representing healthcare clients of all sizes and types in hospital and physician agreements, recruitment compensation and incentive arrangements. Whether on the employer or physician side, our team will partner with you to negotiate as advantageous of an agreement as possible, while ensuring that the arrangement doesn’t run afoul of applicable healthcare laws and regulations.