United States: Safe Harbor For Physician And Practitioner Recruitment

The Final Rule includes a safe harbor for certain physician and practitioner recruitment activities as codified at 42 C.F.R. 1001.952(n). The final safe harbor protects certain payments made for the purposes of inducing a physician or practitioner to locate his or her primary place of practice in an urban or rural Health Professional Service Area ("HPSA") for that physician or practitioner’s specialty. The final safe harbor has been expanded to protect the recruitment activities of hospitals and health care entities in both urban and rural HPSAs but no longer protects the recruitment activities of rural hospitals or health care entities outside those areas designated as HPSAs.

HPSAs are those urban and rural geographic areas, population groups, and facilities designated by the Department of Health and Human Services’ Health Resources and Services Administration’s Bureau of Primary Health Care as exhibiting a shortage of health professionals in a specific specialty area. Recruitment arrangements for a maximum of 3 years are only protected if certain requirements are met, such as:

• The physician or practitioner has either been practicing in his or her current specialty for a period of less than one year or is relocating his or her primary place of practice to a HPSA;
• If the physician or practitioner is leaving an existing practice, at least 75% of his or her revenues must be generated from the treatment of new patients not seen at his or her previous practice;
• The amount or value of any benefits provided may not vary based on volume or value of expected referrals or other business generated that is covered by federal or state health care programs;
• At least 75% of the revenues generated by the new practice must come from treating patients who reside in HPSAs or Medically Underserved Areas; and
• The payment or exchange of anything of value may not directly or indirectly benefit any person or entity, other than the recruited physician or practitioner, in a position to make or influence referrals covered by a federal health care program.

The final safe harbor protects recruitment activities, not retention activities, and only if they are not based on the volume of value of referrals. Income guarantees generally vary based on the physician or practitioner’s income; however, such guarantees are protected by the safe harbor so long as the maximum amount of the guarantee and the formula for determining the level of payment are established in advance.

The new and modified safe harbors further define those business and payment practices that do not violate the Federal Anti-Kickback Statute, and delineate additional payment and business practices that are not subject to criminal prosecution or civil sanction. The forgoing is by no means an exhaustive discussion of the implications of the Final Rule or the Shared Risk Safe Harbors. This issue highlights a few of the new safe harbors likely to have a significant impact on business arrangements within the health care industry. Health care providers need to be aware of these significant new opportunities as they develop and enter into business arrangements to avail themselves of the full protection offered under new and expanded safe harbors.