Insights
Client Alert
Hospitals and Physician Bonus Pools: Improper Designs Prompt Penalties Over $100 Million
December 27, 2013
BY PHILLIP H. STREET, J. MARK POERIO, W. CRAIG SMITH & TARA RAVI
Recent court decisions have resulted in multi-million dollar judgments against two hospitals for improperly structured compensation plans with its referral-source physicians. In both cases, the hospital structured its physician bonus and incentive plan based on outpatient services personally performed by employed physicians. This arrangement nevertheless violated the Stark Law because the services performed by the physicians necessarily included a referral of the facility fee to the hospital. Notably, both hospitals sought advice from outside counsel who advised that the physician compensation structure complied with the Stark Law bona fide employment exception.