Hospital Physician Integration & Employment Strategy

Hospital Physician Integration & Employment Strategy

The relationship between hospitals and physicians has undergone a fundamental structural transformation over the past two decades. The majority of physicians in most markets are now employed by hospitals or health systems — a reversal of the independent practice model that dominated American medicine for most of the 20th century. This employment trend has created significant strategic opportunities for hospital-physician alignment, but also significant compliance complexity.

The Stark Law prohibits hospitals from paying physicians more than fair market value for their services — or structuring compensation in a way that takes into account the volume or value of referrals — without meeting specific regulatory exceptions. The Anti-Kickback Statute prohibits any arrangement in which remuneration is paid to a physician with the intent to induce referrals of Medicare or Medicaid patients. Arrangements that violate either statute create FCA exposure that can be traced back through years of claims — making physician arrangement compliance one of the highest-stakes areas of hospital legal and compliance management.

Service Areas

Physician Employment Model Design

We help hospitals design physician employment structures — including direct employment, captive professional corporation models, and management service organization arrangements — that achieve the clinical and operational goals of physician integration while meeting Stark Law and Anti-Kickback requirements.

Physician Compensation Plan Development

Physician compensation plans must achieve fair market value, must not be set in a manner that takes into account referral volume, and must be commercially reasonable. We help hospitals design compensation plans that meet all three requirements — using RVU-based productivity models, quality incentive structures, and market benchmarking data to build plans that are legally compliant and attractive to physicians.

Fair Market Value Assessment Guidance

Fair market value determinations for physician arrangements require both regulatory understanding and current market data. We guide hospitals through the FMV assessment process — helping hospitals understand when an independent FMV opinion is required, what the FMV assessment process involves, and how to structure arrangements so that compensation falls within an appropriate FMV range.

Stark Law & Anti-Kickback Compliance Review

We conduct comprehensive reviews of hospital physician arrangement portfolios — assessing each arrangement against applicable Stark Law exceptions and Anti-Kickback safe harbors, identifying arrangements with compliance gaps, and developing remediation plans that restructure problematic arrangements before they generate enforcement exposure.

Co-Management Agreement Structuring

Co-management agreements — in which hospitals pay physician groups to manage specific service lines in exchange for meeting quality and efficiency targets — are a powerful alignment tool when structured correctly. We help hospitals design co-management agreements that meet regulatory requirements, define appropriate compensation structures, and create genuine performance accountability.

Physician Recruitment Compliance

Hospitals that recruit physicians to serve the hospital's community may provide certain recruitment incentives — but only within the boundaries of the Stark Law's recruitment exception and the Anti-Kickback Statute's recruitment safe harbor. We help hospitals design physician recruitment programs and incentive packages that achieve their recruitment goals within regulatory boundaries.