New Rule Permits Hospitals to Subsidize Physician Employees

Faegre Drinker Biddle & Reath LLP

A new 2016 Medicare physician payment rule allows hospitals and other provider institutions to make payments to physicians for the purpose of enabling them to employ nonphysician practitioners, such as nurse practitioners and physician assistants. This is an exception to the general Stark Law prohibition on referrals by physicians to institutions with which they have financial relationships.

CMS explained the exception as necessary due to a physician shortage, particularly in rural areas—a shortage exacerbated by the increased demand caused by the Affordable Care Act.  The exception should help relieve the shortage by enabling nonphysician practitioners to perform services that would otherwise be performed by physicians.  It may also reduce health care costs overall, by substituting nonphysician services for physician services.

The new rule also adds clinical social workers and clinical psychologists to the definition of nonphysician practitioners qualifying under the exception.

Not surprisingly, the rule includes a strict prohibition against making the payments conditioned on the physician’s referring patients to the paying institution.

The rule is scheduled for publication in the November 16 Federal Register.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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