In November 2006 the Centers for Medicare & Medicaid Services (CMS) issued Advisory Opinion 2006-01 dealing with the Stark exception for physician recruitment arrangements. Specifically, the Opinion addressed a proposed arrangement whereby a hospital and a medical practice would share the expense of recruiting a new physician into the hospital’s service area and the hospital would provide certain forgivable loans to the physician.
Although the recruited physician would either would move his or her practice at least 25 miles or would derive at least 75% of revenues from professional services furnished to patients not seen or treated by the Physician previously, as required by the recruitment exception, 10 to 20% of the recruited physician’s time would be spent providing medical services at a practice location outside of the hospital’s geographic service area. The parties seeking the advisory opinion sought clarification of whether a physician would be deemed to have relocated his practice to the a hospital’s service area if the physician spends a percentage of his time practicing medicine outside of the hospital’s service area.
Based on the fact that the recruitment exception includes no explicit requirement that the recruited physician spend 100% of his medical practice time in the geographic area served by the recruiting hospital, CMS concluded that the proposed arrangement would meet the recruitment exception. However, CMS notes that it might reach a different conclusion if the time spent by the recruited
physician outside of the geographic service area was more substantial than under the proposed arrangement.
AO-206-01 is noteworthy in that it signals a willingness on the part of CMS to provide more meaningful guidance through the Advisory Opinion process than it has in the past. It also serves as a reminder to physicians and counsel that CMS will apply a technical reading when applying the Stark exceptions.