THE HHS "SAFE HARBORS"

In addition to the prohibition against private individuals benefiting from not-for-profit organizations, there is a probation against hospitals paying physicians for Medicare referrals. The Social Security Act prohibits hospitals from paying physicians for referrals of Medicare patients. Again, hospitals offer incentives to recruit physicians, and the question arises, do these incentives constitute a de facto payment for Medicare referrals? By offering physicians recruiting incentives, are hospitals actually offering an inducement to refer Medicare patients?

To clarify these issues, the Department of Health and Human Services (HHS) published a number of proposed physician recruitment "safe harbors" in 1993. The safe harbors apply to the payment of benefits to physicians by rural facilities that would be protected from prosecution as long as the following seven standards are met:

1. The arrangement is set forth in a written agreement.

2. The new physician is relocating from a practice not less than 100 miles from the new practice location and at least 85% of the revenues generated by the new practice come from patients not previously seen by the physician in his or her former practice.

3. The benefits are provided for a period not to exceed three years.

4. There is no requirement that the new physician make referrals to the recruiting hospital.

5. The new physician is not restricted from establishing privileges at other hospitals.

6. Benefits to the physician cannot be adjusted based on the volume of referrals he or she generates for which payment may be made from Medicare.

7. The new physician agrees to treat Medicare/Medicaid patients.

Though the HHS suggested that final physician recruitment safe harbors would be released in 1999, they have yet to appear.

WHAT TO DO

What is important to remember here is that, as a new physician, you do not have an existing patient base which a hospital might be "buying" by recruiting you. Therefore it is "safer" for a hospital to recruit a physician out of residency than it is to recruit an established physician.

The other important point - the most important - is that your contract should never state or imply that you are obligated to refer patients to the hospital recruiting you. Nor should your income be tied in any way to the volume of referrals you make to the hospital. In addition, the contract should not restrict you from obtaining privileges at other hospitals. Some contracts will, however, stipulate that you need to see Medicare and Medicaid patients, and that is acceptable under government guidelines.