• Gifts and Incidental Benefits to Hospital Medical Staff Physicians
  • July 28, 2008 | Author: Michael A. Dowell
  • Law Firm: Theodora Oringher Miller & Richman PC - Los Angeles Office
  • Gifts, entertainment, and other incidental benefits and business courtesies such as free parking, meals, continuing medical education (CME), and courtesy discounts provided by hospitals to their medical staff physicians may implicate the federal law prohibiting certain referrals by physicians, 42 D.S.C. § 1395nn (the Stark Law) and the federal anti-kickback statute, 42 U.S.C. § 1320a-7b(b) (the Anti-Kickback Statute), and equivalent state laws. Tax exempt nonprofit hospitals are also subject to certain restrictions and reporting obligations in connection with such gifts and incidental benefits. Hospital medical staff gifts and incidental benefits create a financial relationship between the hospital and the physician. A "financial relationship" under fraud and abuse laws is construed very broadly, which means all remuneration from a hospital to a physician must be considered, including non-monetary compensation.

    If a centralized tracking process and consistently applied policy and procedure are not implemented, it is likely that Stark Law-mandated limits are being exceeded and the anti-kickback statute and tax risk is greater than the hospital's legal or compliance department would find acceptable. As part of an effective compliance program, every hospital should develop a policy and procedure for compliance with these laws, to include a process for tracking the provision of gifts, complimentary items, and other incidental benefits provided to physicians (and their immediate family members and office staff).

    Stark Law

    Under the Stark Law, if a hospital has a financial relationship with a physician, the physician may not refer to the hospital for the provision of "designated health services" (including inpatient and outpatient hospital services), and the hospital may not bill for such services, unless an exception is met. Pursuant to the Stark regulations, there are exceptions for non-monetary compensation, medical staff incidental benefits, electronic health records, and e-prescribing. These exceptions are outlined below. Hospitals should review their policies and ensure they are meeting these exceptions.

    Exception for Non-Monetary Compensation Value To $338 (2008 Rate)

    Compensation from a hospital in the form of items or services (not including cash or cash equivalents such as stocks, bonds, gift certificates, or airline frequent flyer miles) that does not exceed an aggregate of $338 per year, if all of the following conditions are satisfied:

    • The compensation is not determined in any manner that takes into account the volume or value of referrals or other business generated by the referring physician
    • The compensation may not be solicited by the physician or the physician's practice (including employees and staff members)
    • The compensation arrangement does not violate the Anti-Kickback Statute or any Federal or State law or regulation governing billing or claims submission
    • The $338 dollar limit is adjusted each calendar year to the nearest whole dollar by the increase in the Consumer Price Index-Urban All Items (CPI-U) for the 12-month period ending the preceding September 30

    Hospitals may provide one annual, local medical staff appreciation function for the entire medical staff, without regard to annual monetary limits imposed by the exception, however gifts or gratuities provided in connection with the medical staff appreciation function must still achieve the exception. Note that the exception protects gifts to physicians, but not gifts to a medical group practice as a whole. Therefore, the exception would not cover a single gift or multiple gifts over the course of a year from a hospital to a large group practice with a value in the aggregate at $329 times the number of physicians in a group. Physicians are permitted to repay excess non-monetary compensation, to the extent (a) the excess compensation was made inadvertently, (b) the excess compensation does not exceed 50% of the limit, (c) the physicians repays the excess within the same calendar year or within 180 days after received, whichever is earlier, and (d) the designated health services entity and the physician do not rely upon this repayment provision more than once every three years.

    Compliance with this exception is only possible if the hospital implements a comprehensive and methodical tracking system to accurately monitor their non-monetary compensation arrangements with physicians.

    Exception for Medical Staff Incidental Benefits

    The exception for medical staff incidental benefits is limited to items and services provided while the physicians are on the hospital campus. Hospitals routinely furnish members of their medical staff with certain incidental benefits – such as free or discounted parking or meals – thereby creating numerous compensation arrangements. Compensation in the form of items or services (not including cash or cash equivalents) from a hospital to a member of its medical staff when the item or service is used on the hospital's campus, is excepted from the Stark law rules if all of the following conditions are met:

    • The compensation is provided to all members of the medical staff practicing in the same specialty (but not necessarily accepted by every member to whom it is offered) without regard to the volume or value of referrals or other business generated between the parties
    • Except with respect to identification of medical staff on a hospital web site or in hospital advertising, the compensation is provided only during periods when the medical staff members are making rounds or are engaged in other services or activities that benefit the hospital or its patients
    • The compensation is provided by the hospital and used by the medical staff members only on the hospital's campus. Compensation, including, but not limited to, Internet access, pagers, or two-way radios, used away from the campus only to access hospital medical records or information or to access patients or personnel who are on the hospital campus, as well as the identification of the medical staff on a hospital web site or in hospital advertising, will meet this "on campus" requirement.
    • The compensation is reasonably related to the provision of, or designed to facilitate directly or indirectly the delivery of, medical services at the hospital
    • The compensation is of low value (currently, less than $29) with respect to each occurrence of the benefit (for example, each meal given to a physician while he or she is serving patients who are hospitalized must be of low value). This limit is adjusted each calendar year to the nearest whole dollar by the increase in the Consumer Price Index-Urban All Items (CPI-U) for the 12-month period ending the preceding September 30.
    • The compensation is not determined in any manner that takes into account the volume or value of referrals or other business generated between the parties
    • The compensation arrangement does not violate the Anti-Kickback Statute or any federal or state law or regulation governing billing or claims submission
    • Other facilities and health care clinics (including, but not limited to, federally qualified health centers) that have bona fide medical staffs may provide compensation under this exception on the same terms and conditions applied to hospitals under this exception

    This exception does not protect the provision of cell phones or devices used to communicate with patients or other personnel not on the hospital campus, however, two-way radios, pagers and internet access are permissible if such technology is used to access medical records or information or access patients or personnel who are on the hospital campus.

    A simple listing or identification of medical staff on a hospital's web-site, including listings of affiliated physicians in the advertisement, is an excepted incidental benefit. Advertising or promoting a physician's private practice on the hospital's web-site would not be considered an excepted incidental benefit (the hospital would have to charge fair market value or fit within the non-monetary compensation exception under $338).

    Note that in contrast to the non-monetary compensation exception, a hospital does not have to aggregate annually the value of incidental benefits and, as such, may provides its medical staff with unlimited incidental benefits, provided each benefit is below $29 (as adjusted to the CPI) and the other requirements of the exception are satisfied.

    Exception for Compliance Training

    The compliance-training exception explicitly acknowledges that while compliance training provided by a hospital to physicians in the community may arguably constitute remuneration to the physicians, this type of activity does not raise concerns under Stark or the Anti-kickback law. "Compliance training" refers to training in the basic elements of a compliance program or specific training on the requirements of state and/or federal health care programs (e.g. billing, coding, reasonable and necessary services, documentation and unlawful referral arrangements). The compliance training must take place in the local community or service area (i.e., cannot be used as an excuse for free trips) and may include training regarding the basic elements of a compliance program or specific training regarding requirements of Federal healthcare programs, such as billing and coding. The compliance training may be provided to the physician and/or the physician's office staff. Continuing medical educational programs generally do not qualify as Compliance Training, however, CMS does permit compliance programs for which CME credit is available, but only to the extent compliance training is the "primary purpose" of the program. Note, however, that individual assistance to a physician to establish a compliance program or review/audit the physician's compliance with billing, coding, and other Federal healthcare program requirements would not fit within the scope of the exception.

    Exception for Electronic Health Records and E-Prescribing

    In 2006, CMS published a safe harbor under the anti-kickback statute and an exception under the Stark statute for hospitals to donate to members of their medical staff software for electronic health records and software and hardware for e-prescribing. The hospital can donate software to physicians, who in turn must pay 15 percent of the hospital's cost of the system.

    Anti-Kickback Law

    The anti-kickback statute prohibits offering, paying, soliciting, or receiving any remuneration directly or indirectly, covertly or overtly, in cash or in kind, for (a) the referral of patients, or arranging for the referral of patients, for the provision of items or services for which payment may be made under governmental healthcare programs; or (b) the purchase, lease or order, or arranging for the purchase, lease or order, of any good, facility, service or item for which payment may be made under governmental health care programs. Gifts and incidental benefits to physicians do constitute "remuneration," however a determination as to whether or not such remuneration was made "in return for" or "to induce" referrals will be based upon the intent of the parties.

    The OIG has explicitly declined to adopt an anti-kickback law safe harbor or exception for de minimis compensation, however given the intent based nature of the law, it is unlikely that giving gifts or incidental benefits that meet the monetary and other standards of the Stark law exception would violate the anti-kickback law.

    Tax Exempt Organization Requirements

    In general, to maintain 501(c)(3) tax-exempt status, no part of the net earnings of the hospital may inure to the benefit of any insiders, and any benefit to private parties cannot be more than incidental (i.e., indirect and insubstantial in amount). Tax-exempt hospitals must report (on Form 1099 for non-employed physicians) any item or gift that is included in a physician's "gross income" if the total fair market value of the benefits that the physician receives directly from the hospital during the year is at least $600. The physician benefits may also need to be disclosed on the hospitals' Form 990.

    Developing and Implementing A Policy and Mechanism for Tracking Hospital Medical Staff Physician Gifts and Incidental Benefits

    The first step in developing an effective compliance policy and procedure for the provision of medical staff physician gifts and incidental benefits is to evaluate and assess the types of gifts and incidental benefits currently being offered, to whom, and under what circumstances. Examples of gifts and incidental benefits to track include: continuing medical education, parking, meals, donuts and bagels, coffee mugs, flowers, holiday hams or turkeys, logo gifts, golf; tennis; health club discount; sporting event tickets; art, theatre or lecture tickets, medical malpractice insurance, office supplies and stationery; free computer and/or internet access, professional courtesy discounts, and any other items or services of value.

    Next, analyze the categories of gifts and benefits to determine compliance with applicable laws, and to quantify the individual and aggregate value of the gifts and incidental benefits. Then make a determination as to which gifts and incidental benefits the hospital is comfortable (from a compliance perspective) to continue providing. In developing a written policy, a hospital should identify the parties who are permitted to provide medical staff physician gifts and incidental benefits on behalf of the hospital, to identify their reporting and/or tracking responsibilities with regard thereto, and to set forth a process for getting new medical staff physician gifts or incidental benefits review and approved (or rejected). The policy should also specifically identify the categories of gifts and incidental benefits that the hospital prohibits from being provided.

    In the preamble to the non-monetary compensation exception, CMS stated that hospitals should implement tracking and valuation mechanisms related to the provision of non-monetary compensation, and should not provide benefits to physicians about which they are unaware or for which they are unable to account. Mechanisms for tracking the provision of gifts, incidental benefits, and other business courtesies offered to medical staff physicians may involve sophisticated electronic swipe debit cards or a basic spreadsheet with formulas included to automatically tally running totals. The mechanism selected by each hospital should be driven by the extent and nature of gifts and benefits provided by the hospital. The most important point is that the items and services must be tracked so that fraud and abuse thresholds (per incident or in aggregate) will not be exceeded, and reporting obligations can be met.