CROSS OWNERSHIP IS STARK/AKB TROUBLE
A new OIG Opinion posted November 12th indicates, once again, that cross ownership between two practices that provide services for each will almost automatically generate an objection to the arrangement based upon the anti-kickback and Stark laws.
In this case, an anesthesiology group was asked to provide services to a psychiatry group, particularly for electroconvulsive therapy patients. One of the members/owners of the anesthesiology group also owned an interest in the psychiatry group. The doctor was both a psychiatrist and an anesthesiologist, but had stopped accepting new psychiatry patients.
The anesthesiology/psychiatry doctor and the two groups tried to enter into an arrangement and structure it to try to limit the objections of OIG. The OIG brushed aside those attempts, and basically found that where a physician or group has cross ownership, and there are referrals which result in federal funds being paid for patient services, it will find an anti-kickback/Stark violation.
Many physicians exiting medical school/residency programs or in relocation are offered loans with full or partial forgiveness as a recruiting tool. Generally, these loans are considered taxable income in the year forgiven. A recent Federal District Court case may have significant implications on when the year of forgiveness occurs under the ‘loan and forgiveness models’ recruitment arrangement. In this case, the clinic involved did not treat the loans as compensation until the fifth anniversary of the physician’s employment. At that time, the clinic/hospital forgave the advances, and issued a 1099 to the doctor reflecting the forgiveness of the loans. The Court looked to the intent of the parties and concluded that the parties never intended the loans to be repaid or interest paid on the loans, even if the actual written terms of the loan agreements required repayment. The Court found that because neither party intended the funds advanced ever be repaid to the employer, the loans were not a bonafide promissory note, and were disguised compensation in the year first paid.
- Review all of your relocation loan/advance packages and documents to recast them to operate as intended in regard to tax consequences;
- Consider having interest only payments by the physician during the term of the Promissory Note. The Court noted that neither principal nor interest was paid by the physicians indicating the lack of validity of the transaction.
- Consider eliminating such loan/advance transactions, and simply pay your physicians more in the first quarter of their employment to have the same effect. In my decades in reviewing such matters, there is little activity where hospitals actually seek to recover loaned funds from physicians, and few cases where physicians have tried to leave their employment after a few months or year without significant other issues having rising between the physician and the physician’s employer. Another approach to eliminating loans/advances is making significant bonus payments for time in service, meeting quality and productivity goals, etc. In many cases, the bonuses for a physician meeting these goals are relatively minor, particularly when compared to the amount offered new physicians for signing bonuses, loan forgiveness and relocation expenses.
- Have your organization treat physicians so they will not want to leave. The best hospitals and clinics do this every day.
ACA DEADLINES UPDATE
- HIPAA electronic transaction compliance certification
- Adult/child coverage mandate
- Annual limit prohibition
- Essential health benefits coverage mandate
- Preexisting condition exclusion prohibition
- Prohibition on discrimination with respect to clinical trial participation
- Prohibition on provider discrimination
- Limit on waiting periods exceeding 90 days
- Health insurance exchange coverage available
Given healthcare.gov’s issues, these deadlines could be delayed one to two years.
This newsletter is edited by Paul Wallace of Jones • Wallace, LLC, a member of the American Bar Association Healthcare Law Section and the American Health Lawyers Association who has been representing physicians and healthcare practices for over 25 years. Mr. Wallace assists physicians in health practices in contract items, federal legal compliance, creation of practice entities, estate and wealth planning and similar issues. Please feel free to call if you have any questions about this newsletter or any other matter at (812) 402-1600 or firstname.lastname@example.org.