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The Stark Law: What It Means for Provider Recruitment

Adaptive Medical Partners | Healthcare News, Physician Recruiting

With hospitals and medical practices facing an average 7 percent annual turnover rate of physicians, recruiting ranks as a top concern for administrators. However, minimizing the time to recruit replacements requires a plan. An important element in the development of any strategic physician recruitment plan is a review for compliance with applicable regulations, including the Stark Law. Though you should consult with legal counsel before enacting your recruitment strategy, you should be aware of possible compliance issues and have an understanding of the Stark Law essentials to help avoid possible legal pitfalls.

What Is the Stark Law?


Originally enacted by Congress in 1989 as the Ethics in Patient Referrals Act, the legislation also known as the physician self-referral law initially applied only to physician referrals for clinical laboratory services. Over the years, Congress expanded the scope and number of regulations that collectively are known as the Stark Law. The law prohibits physicians from referring Medicare or Medicaid patients for designated health services at an entity with which the physicians or family have a financial relationship.

The Stark Law also intends to prevent hospitals from competing with each other by buying referrals. As a result, there are specific guidelines that apply to the primary care and specialist physicians recruited and the incentives you may offer.


Because the Stark Law is a strict liability statute, intent is irrelevant. You can violate the law whether you mean to or not. Even unintentional, technical violations of the statute result in penalties of $15,000 per claim, as well as mandatory repayment of any Medicare or Medicaid reimbursement received for those services. Additionally, you could be excluded from participation in the Medicare program as well as potentially face greater civil monetary penalties and further scrutiny under the False Claims Act. Depending on the number of claims made under an unlawful employment or recruitment arrangement, the potential liability could total millions.

The Physician Recruitment Exception

Fortunately, the legislation provides more than two dozen exceptions to the Stark Law. The physician recruitment exception is one of these and applies to hospitals, federally qualified health centers and rural health clinics, as well as physicians joining an established medical group. To qualify for the exception, hospitals must meet the following basic requirements:

  1. The recruited physician must relocate at least 25 miles to the hospital geographical service area. (If the physician will not be relocating that distance, then at least 75 percent of her revenue must come from new patients.)
  2. The physician must join the hospital medical staff
  3. The physician cannot be required to refer patients to the hospital.
  4. The physician’s payment cannot be based on the volume or value of any referrals.
  5. The physician cannot be prevented from establishing privileges at other hospitals.
  6. The hospital and physician must have a written arrangement that is signed by both parties in advance.

Permissible Payments to Providers

As part of the recruitment process, hospitals may pay the following associated fees:

  • Recruiter fees
  • Expenses for items such as airfare, lodging and meals related to visits by the recruited physician and family to the hospital’s geographical area
  • Moving expenses
  • Telephone calls
  • Tail malpractice insurance covering the physician’s prior practice

Recruiting for quality physicians who are a fit for your practice and its patients can be challenging, and the regulations involved can be complex. Let Adaptive Medical Partners, a professional physician recruiting agency, help simplify the process.