Can be hard to prove intent after the fact

The lesson from the Tenet settlement is that even if your intentions were honorable all along, it can be difficult to prove that position once the federal government brings charges against you, says Amy S. Leopard, JD, a partner and director of the health care regulatory compliance group with the law firm of Walter & Haverfield in Cleveland.

It may be difficult to prove beyond a reasonable doubt that a recruitment package was intended to benefit an existing referral source, Leopard says. However, if the magnitude of the benefits to those in addition to the recruit is significant, the government is ready and willing to pursue those cases through its exclusion authority, she says.

"We are also seeing cases in our office where the failure to comply with federal referral laws serves as the basis for a party to challenge whether the recruitment agreement is valid and enforceable," she says. "Hospitals should respond by having a compliance checklist that covers Stark II, the Anti-Kickback Statute, and if a tax-exempt facility, the IRS guidance in 'Revenue Ruling 97-21' that requires a demonstrable community benefit and includes only reasonable expenses."

Starting point: Comply with Stark II

Leopard explains that while Stark II compliance is not determinative of Anti-Kickback Statute compliance, it is the starting point. Congress clearly contemplated that valid recruitment packages could be crafted if they contain the protections against program abuse established by Health and Human Services in the Stark rules, she says.

Under the 2004 Stark II rule, recruitment benefits cannot directly or indirectly benefit anyone other than the recruit. Hospitals may pay benefits through an existing physician group only if they do not consider the actual or anticipated referrals by any physicians in the group. In the case of an income guarantee, only actual additional incremental costs attributable to the recruited physician qualify as expenses, so items such as existing office rent, utilities, supplies, and support staff cannot be counted.

"The bottom line is that relocation expenses and reasonable signing bonuses needed to attract the physician to the service area and the incremental expenses for new office space, additional staff support, supplies, and equipment traceable directly to the new recruit are generally allowable, but must be properly documented," she says.


For more information, contact:

  • Amy S. Leopard, JD, Partner and Director, Healthcare Regulatory Compliance Group, Walter & Haverfield, 1301 E. Ninth St., Suite 3500, Cleveland, OH 44114-1821. Telephone: (216) 928-2889. E-mail: