CMS Advisory Opinion Finds Non-Compete Provision Meets the Requirements of Stark Law Physician Recruitment Exception

The Centers for Medicare & Medicaid Services (CMS) recently issued an advisory opinion stating that a physician recruitment arrangement including a non-competition provision meets the requirements of the physician recruitment exception under the Stark law. The approved non-compete arrangement restricts the physician from establishing, operating, or providing professional medical services at any location within a twenty-five-mile radius of the hospital for one year.

Under the Stark law, the original Stark physician recruitment exception required that a practice not impose additional restrictions on a recruited physician other than conditions related to the quality of care. However, in Stark III, CMS stated that it now believes that categorically prohibiting non-compete provisions from recruitment arrangements makes it difficult to recruit physicians, and that practices may be unable to hire physicians despite receiving a hospital’s financial assistance in compliance with the Stark physician recruitment exception. CMS provided several factors that determine whether a non-competition provision imposes practice restrictions that “unreasonable restrict” a physician’s ability to practice medicine in the geographic service area. In Advisory Opinion 2011-01, CMS found that: 1) the time period restriction of one year was reasonable, 2) the distance requirement was reasonable based on the hospital’s geographic service area, 3) the physician would still be permitted to practice at certain hospitals both within and outside the hospital’s service area during the one year period, and 4) the non-competition provision complies with state a local laws.

The advisory opinion provides health care entities with a framework for structuring non-competition provisions under the requirements of the Stark law physician recruitment exception. Wachler & Associates regularly advises clients on Stark, fraud and abuse, and the anti-kickback law. If you have any questions regarding the physician recruitment exception, the Stark law in general, or other Stark exceptions please contact a Wachler & Associates attorney at 248-544-0888 or visit www.wachler.com