Publications: Hospital Support of Medical Staff Social Functions: Sample Policy Recommendations

Medical staffs are an integral part of healthcare organizations and it is not uncommon for hospitals to subsidize or entirely cover the costs of medical staff social events such as annual dinner dances and golf outings. In light of increased scrutiny under the Anti-kickback Statute of any financial or other incentives provided to referral-source physicians, and increased Stark Law enforcement activity, hospitals are questioning whether such continued support of medical staff events is legally prudent.

While it is certain that lavish golf outings with expensive take-home gifts for physicians are no longer appropriate even for hospitals that are inclined to pay for such events, hospitals are able to cover some or all of the costs of medical staff social functions provided that certain safeguards are in place to ensure that such support is compliant with both the Anti-kickback Statute and the Stark Law (42 U.S.C. § 1320a-7b(b)(1) and 42 U.S.C. § 1395 nn et seq., respectively). Whereas support may be structured in such a way as to comport with the Anti-kickback Statute—albeit not under the protections of a safe harbor—compliance with the Stark Law is more challenging, since no Stark Law exception squarely applies to such activity. Although an organization may rely on the more general Stark exception for "Non-Monetary Compensation up to $300," the preferred approach to Stark compliance may be to avoid triggering the Stark Law in the first place. Based on more recent guidance as to what constitutes "indirect compensation" implicating the Stark Law, hospitals should be able to support medical staff social events so long as certain triggering factors are avoided.

I. Anti-Kickback Statute Compliance

The Anti-kickback Statute's prohibition against giving or receiving "any remuneration (including kickback, bribe or rebate) directly or indirectly, overtly or covertly, in cash or in kind" to induce or reward referrals is worded so broadly as to seemingly prohibit ordinary business activities and industry standard practices that may involve the receipt of any form of remuneration by a referring physician if the intent to induce or reward referrals may be inferred (42 U.S.C. § 1320a-7b(b)(1)). Gifts and entertainment in particular are under heightened scrutiny, as the Office of Inspector General (OIG) has clearly indicated in various Fraud Alerts that physician incentives and gifts to any referral source are suspect under the Anti-kickback Statute, based on the argument that such perks may be intended to reward and encourage referrals or other generation of business (See, e.g., "Hospital Incentives to Referring Physicians" and "Prescription Drug Marketing Practices," 59 Fed. Reg. 65372 (Dec. 19, 1994)). Moreover, there is no safe harbor to protect hospital support of medical staff social functions, which means that such activity is subject to review but is not per se illegal.

Accordingly, hospital support of medical staff social events should be premised on appropriate goals of promoting communications and collegiality among providers in order to enhance quality of care. Treating medical staff members differently based on respective volume or value of referrals (e.g., through varied take-home gifts, selective invitations or tiered pricing of tickets for physicians) would be inappropriate and could be construed as an intent to reward or induce referrals in violation of the Anti-kickback Statute.

The sample policy recommendations presented below set up a framework to demonstrate appropriate intent. Moreover, they factor in certain protections that the OIG sets forth in safe harbors generally, and that avoid those types of activities deemed suspect in the OIG's various Fraud Alerts.

II. Stark Law Compliance

As with the Anti-kickback Statute, terms are broadly defined under Stark so as to capture a wide range of potentially abusive physician self-referral activity. A "financial relationship" implicating the Stark Law would include any remuneration by a hospital "directly or indirectly, overtly or covertly, in cash or in kind" to a physician who refers certain designated health services (DHS) such as hospital inpatient and outpatient services (42 U.S.C. § 1395 nn(a)(2)). Gifts, entertainment and other benefits of value provided to referral-source physicians can be problematic, especially since the Stark Law is a strict liability statute, meaning that if it is implicated by a particular arrangement or activity that does not meet a statutory exemption or exception—which are somewhat akin to the safe harbors under the Anti-kickback Statute—such arrangement or activity is per se illegal and subject to prosecution.

To allow for reasonable activity in this area, the rules provide an exception addressing "Non-Monetary Compensation up to $300" (42 C.F.R. § 411.357(k)). Pursuant to this exception, an entity may provide compensation in the form of items or services (not including cash or cash equivalents) that does not exceed an aggregate of $300 per year, if all of the following conditions are satisfied: (i) the compensation is not determined in a manner that takes into account the volume or value of referrals or other business generated by the referring physician, (ii) the compensation may not be solicited by the physician or the physician's practice (including employees and staff members), and (iii) the compensation arrangement does violate the Anti-kickback Statute.

While such exception could apply to hospital support of medical staff social functions, given the various small gifts, occasional dinners and other perks provided to physicians by a hospital that may add up through the course of a year to the maximum provided for in the exception, hospitals may prefer to keep such amounts available for leeway in physician relations. Since there is no other clear Stark Law exception that would apply to medical staff event support, the key in continuing appropriate support would be to ensure that such support does not constitute a direct or indirect financial relationship triggering the Stark Law.

Recent changes to the Stark regulations further clarified the definition of "indirect ownership and investment interest" and "indirect compensation arrangement" and appear to allow some leeway in terms of hospital support of medical staff sponsored events, provided that certain parameters are met so that the support does not constitute "indirect compensation" under the Stark Law.

What the new regulations state with respect to compensation arrangements is that the following would constitute an "indirect" arrangement, implicating the Stark Law: (a) there is an unbroken chain between the referring physician and the entity furnishing DHS; (b) the referring physician receives compensation from the person or entity in the chain that has the direct financial relationship with the entity furnishing DHS, and such compensation takes into account the volume or value of the DHS referrals; and (c) the entity furnishing the DHS has actual knowledge of, or acts in reckless disregard or deliberate ignorance of, the fact that the referring physician receives compensation that varies with or otherwise reflects the value or volume of referrals or other business generated.

Thus, under the definition of "indirect compensation," the following golf outing example would be problematic. Every year the hospital covers the majority of the costs of a day-long golf outing, with golfing, lunch and an open bar for physicians throughout the day. The hospital, through tracking inpatient admissions and other business generated by medical staff members for the previous twelve months, determines who will be invited. It directs the medical staff president to send invitations to all physicians who meet or exceed a certain number of admissions or who generate a certain amount of other business for the hospital. Other medical staff members are sent tickets that they may purchase for one hundred dollars to attend the event.

This type of support implicates Stark as "indirect compensation" and could subject the hospital and participating physicians to penalties if investigated. There is an unbroken chain between the hospital and referring physicians, since the hospital is providing remuneration to the medical staff and the medical staff in turn provides remuneration to the referring physicians. Remuneration on the first level is that money provided by the hospital to the medical staff to fund a golf outing. Remuneration on the second level is the medical staff providing the golf outing to the physicians. Furthermore, the invitations go out only to select physicians based on volume of referral and other business generated for the hospital. While others are invited, they must pay a fair amount of the cost attributable to their attendance. Finally, the hospital clearly directs the approach taken by the medical staff as to who is invited and what each person pays. This type of hospital support of a medical staff social event would, of course, be inappropriate under Stark (as well as the Anti-kickback Statute).

The following sample policy recommendations establish a framework designed to maintain distance from an arrangement that would otherwise implicate the Stark Law. As with the Anti-kickback Statute, the various components set forth a reasonable basis for hospital support of medical staff events. Please note that certain dollar amounts are included for consideration but that such amounts could certainly be adjusted downward to reflect the desires of the hospital's officers and directors.

III. Proposed Recommendations for a Draft Policy on Hospital Support of Medical Staff Social Events

1. Hospital support shall in no way be intended to reward referrals of patients or other business from medical staff members.

2. Hospital support shall be limited to social and/or educational activities or events that serve to bring members of the medical staff and hospital administration together in an environment conducive to building collegiality among such persons, therefore serving indirectly to enhance teamwork and quality in patient care.

3. Hospital shall avoid knowingly funding events where any vendor for the event is an entity owned, in part or entirely, by a referral-source physician or an immediate family member of same, unless the hospital is able to demonstrate that vendor charges are fair market value. Such value may be determined through surveys, a bidding process, or other third party information sufficient to compare these vendor charges to an unrelated vendor's charges.

4. Hospital support shall be reasonable in scope and may cover all or part of an event. Amounts must not exceed the reasonable amount of money necessary to cover the proposed activity. Proposed activities must be local, and shall not exceed one day. No travel or lodging expenses shall be covered by the hospital. Activities shall not include extravagant food or beverage (e.g., meals with an individual cost exceeding $35 excluding drinks, and expensive alcoholic beverages such as premium champagne or wine costing more than $20 per bottle), or extravagant entertainment (e.g., costing more than $75 per person for a shorter event such as a concert or sporting event, or more than $200 per person for a daily event such as a golf outing). Amounts provided by the hospital shall not cover event "extras" such as take home gifts. However, small gifts with a value of ten dollars or less and which include a hospital logo may be provided by the hospital, and other gifts may be provided so long as they are included in the $300 per physician annual aggregate of gifts from the hospital.

5. Hospital support in any one year shall be limited to no more than an annual aggregate of $100 times the number of physicians on the medical staff.

6. The hospital must require that the event be open to all medical staff members irrespective of number of referrals made to or other business generated for the hospital. No part of the event shall distinguish in any way among medical staff members based on such criteria. This rule applies throughout the preplanning process, invitation stage and the actual event.

7. Hospital support shall be given to the committee or person charged with event planning via check or money order made out to the account of the medical staff. No amounts shall be deposited into a personal checking account.

8. Hospital support amounts must be logged by date and event. The log must also itemize the expenditure to the extent the event pricing is broken down by the event vendor (e.g., by food, entertainment and drinks).

9. The hospital president must maintain final discretion as to which events the hospital will support, and final approval of hospital support amounts must be given by the hospital president, who shall certify that the amounts meet the applicable requirements of this policy. Such certification shall be maintained with the log referred to above. 
 

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