Medical Directors and Stark Regulations

November 1, 2006

My local hospital wants me to be the medical director for its new sleep lab. I'd still keep my practice, of course. What are the rules regarding how I'd be reimbursed? I sort of remember reading that I'd have to be reimbursed at the same rate as an emergency-room physician or something.

Question: My local hospital wants me to be the medical director for its new sleep lab. I'd still keep my practice, of course. What are the rules regarding how I'd be reimbursed? I sort of remember reading that I'd have to be reimbursed at the same rate as an emergency-room physician or something.

Answer: The legal issue is Stark II, which essentially prohibits medical directors from receiving more than fair market value for the services they provide lest there be an incentive for the physicians to send more patients to their hospital's sleep center than to another.

Fair market value can be simply based on the value a physician provides. But most agreements use hourly-wage arrangements falling under safe-harbor methodologies laid out in Stark, as follows:

An hourly payment for a physician's personal services (that is, services performed by the physician personally and not by employees, contractors, or others) shall be considered to be fair market value if the hourly payment is established using either of the following two methodologies:

  • The hourly rate is less than or equal to the average hourly rate for emergency room physician services in the relevant physician market, provided there are at least three hospitals providing emergency room services in the market; and

  • The hourly rate is determined by averaging the 50th percentile national compensation level for physicians with the same physician specialty (or, if the specialty is not identified in the survey, for general practice) in at least four of the following surveys and dividing by 2,000 hours. The surveys are:

  • Sullivan, Cotter & Associates, Inc. - Physician Compensation and Productivity Survey

  • Hay Group - Physicians Compensation Survey

  • Hospital and Healthcare Compensation Services - Physician Salary Survey Report

  • Medical Group Management Association - Physician Compensation and Productivity Survey

  • ECS Watson Wyatt - Hospital and Health Care Management Compensation Report

  • William M. Mercer - Integrated Health Networks Compensation Survey.

I strongly advise you to have the hospital's legal team review the final written agreement.