Hospital Recruitment Partnerships

Escalating costs and stagnant reimbursement force many medical practices to turn to hospitals for financial help with physician recruitment. In turn, hospitals find it increasingly difficult to attract needed specialists. Added to this mix is a generation of physicians with differing work priorities than their predecessors

The Stark law, the federal antikickback statute and income tax rules regarding tax-exempt hospitals affect recruitment arrangements when hospitals and group practices consider subsidies and incentives. If the group accepts hospital assistance they need to have a recruiting agreement in place with the facility that is supported by the facilities community needs analysis. To complicate matters, what the Internal Revenue Service deems acceptable sometimes differs from the rules of the Department of Health and Human Services’ Office of Inspector General. The interpretation of what is acceptable falls mainly to in-house council to decipher.

Whether the candidate is employed by the group or hospital, physician groups should expect hospitals to cover recruitment costs. These include fees to recruitment firms, candidates’ travel expenses for site visits and interviews, and relocation expenses. It’s also reasonable for the hospital to pay “tail” insurance on a previous malpractice policy, a one­time signing bonus and to provide loan forgiveness if the physician stays in the community for a set number of years.

If your medical group wants to employ the new doctor you should seek an income guarantee loan from the hospital in the form of a working-capital loan that will also cover documented incremental increases in overhead to help with cash flow.

If the hospital employs the physician, but he/she works out of the practice, the employment agreement will be between the hospital and the recruit. Discuss what the protocol is for who will manage the recruitment process and how the decision to hire will be made and who will manage the day to day expectations once on boarded. The hospital should establish an agreement with the practice to lease space and subsidize staffing requirements and possibly even supplies. Carefully document the cost to the practice, if audited only fair market value will be justifiable. Patients you provide and lost revenue from the practice generally are not allowed. You can expect the hospital to pay directly for all expenses personally attributable to the new physician, such as health and malpractice insurance, continuing education, professional dues, subscriptions, licenses, pager and cell phone.

Your medical group may choose to employ the new physician itself and set up a “personal services” agreement with the hospital. Such arrangements often cover specialists who provide surgical coverage, hospitalist services, emergency-department coverage, etc. Make sure you follow Stark law regulations when determining the fair market value of these services. If the personal services agreement includes a title such as medical directorship of a service or department, or time at a satellite clinic you must carefully document the actual time spent on this work.

Physician groups should use caution when forging financial agreements with hospitals. Do not assume that the hospital administrator knows all aspects of the laws governing the arrangement. The same applies to the hospital’s lawyer, who might lack complete knowledge of the Stark law and antikickback statute. Health care law is a specialty unto itself.