Problematic Arrangements Between U.S. Hospitals and Their Staff Physicians

Maria K Todd, MHA PhD is a trusted adviser to the healthcare industry in the USA and abroad.


  • Sublease Agreements: Hospitals cannot enter into sublease arrangements with physicians in order to host town hall meetings with Medicare, Medicaid, or otherwise insured beneficiaries in the physicians’ offices. The rental value for these arrangements must be at fair market value and cannot take into consideration the potential volume or value of referrals from the physicians to the hospital. Additionally, the rent cannot be paid on a monthly basis regardless of whether or not the hospital conducts any meetings in the physicians’ offices that month.
  • Reduced or discounted office space: Leasing or space use that is charged at less than fair market value in exchange for any cash or other valuable consideration is not permitted.
  • Shared Marketing Agreements: The hospital cannot enter into Shared Marketing Agreements with physicians in order to increase the physicians’ patient base and revenues. This is different than marketing bundled case rates, but the rules for marketing bundled case rates must be followed meticulously. There are many inexperienced consultants suggesting and recommending strategies that are non-compliant. The offers cannot include inducements that raise admissions or utilization for the hospital in an inappropriate manner.
  • Vendor Marketing Agreements: Vendor Marketing Agreements can become problematic similar to Shared Marketing Agreements if there is not cost-sharing by the physicians.
  • Medical Directorship Agreements: The Medical Director Agreements cannot be based upon a target number of referrals/admissions to be made to the Hospital by the physicians. Otherwise basing offers of consideration for the position of Medical Director appointment if the physician refers or admits a certain number of patients each month/year.
When these arrangements are made, anyone who has direct knowledge of them can later become a whistleblower or what is known as a qui tam relator. Qui tam relators can make money by blowing the whistle if the government accepts the case and wins. They share in the penalty. That means a former hospital executive, secretary, a consultant, or even a competitor. While it was once thought to be a career ending act to blow the whistle, if the penalty amounts to several million dollars and the whistleblower is cut in for up to a third, who needs to worry about a future career? Also there’s no statute of limitations on healthcare fraud prosecution, so the whistleblowing could come immediately after the decision to retire, a sudden serious illness that removes the whistleblower from the workforce, or other triggers.
Maria K Todd, MHA PhD is a trusted adviser to the healthcare industry in the USA and abroad.
Maria K Todd, MHA PhD

To learn more or inquire about physician compensation arrangements and other issues surrounding physician hospital integration and alignment, contact me today via email or by phone. Follow my blogs to find articles with fresh, original content here and on LinkedIn’s Pulse to find a ton of insights and information on managed care and contracted reimbursement issues for today’s healthcare providers and facilities.
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