Act 337 of the Regular Session of the 2011 Louisiana Legislature enacted an amendment to Louisiana R.S. 37:1285(A) to add new subsection (A)(32), which provides an additional ground for physicians to be disciplined by the Louisiana State Board of Medical Examiners (the “LSBME”). The new ground relates to a physician holding herself/himself out to the public as being certified by a public or private board or using the phrase “board certified”. In order for a physician to use the phrase “board certified” with the public, all of the following criteria must be met:

(a) The full name of the board from which the physician received certification and the name of the specialty or subspecialty is included in the advertisement;

(b) The board that provides the certification meets any of the following qualifications:

(i) It is a member board of the American Board of Medical Specialties or an American Osteopathic Association certifying board;

(ii) The board has been approved by the LSBME;

(iii) The board requires an Accreditation Council for Graduate Medical Education or American Osteopathic Association approved postgraduate training program that provides complete training in that specialty or subspecialty.

(c) If the physician advertises and does not meet the criteria articulated above, the physician must list his or her qualifications for performing the advertised medical procedure or procedures.

The bill was signed by Governor Jindal on June 29, 2011. It will become effective August 15, 2011.

Complying with this new enactment is important, because failure to do so provides grounds for discipline of a physician, which may include refusal to issue, suspension, revocation, or other disciplinary action against the license of a physician by the LSBME.
 

In Oliver v. Magnolia Clinic, 2010-2785 (La. 3/25/11), 57 So. 3d 308, the Louisiana Supreme Court vacated a Third Circuit ruling that nurse practitioners were not covered by the Louisiana Medical Malpractice Act and did not benefit from the cap on damages. The Supreme Court remanded the case to the Third Circuit for an en banc consideration in order to obtain a majority opinion on the issues presented.

Upon original hearing, two judges of a five judge panel of the Third Circuit ruled the Medical Malpractice Act’s inclusion of nurse practitioners within its ambit violated the equal protection guarantees of the Louisiana Constitution and La. R. S. 40:1299.41(A)(1) and was, therefore, unconstitutional. Two judges on the panel ruled that the inclusion of nurse practitioners as health care providers entitled to the protection of the Medical Malpractice Act did not go into effect until the amendment of the statute in 2009. Because the alleged malpractice of the nurse practitioner occurred in 2000-2001, the statute did not cover the defendant nurse practitioner, and she was not entitled to a cap on the damages awarded at trial.
 

One judge dissented and opined the cap on damages did not violate the equal protection clause of the Louisiana Constitution, without addressing whether the inclusion of nurse practitioners in the Medical Malpractice Act was constitutional. His opinion was that the legislature, not the court, had the responsibility and the authority to fix the problem of the present day value of the $500,000 cap (as compared to the value when enacted). Because there was no clear majority ruling, the Supreme Court remanded the case for an en banc consideration.

The facts established at trial showed that the nurse practitioner was a high school graduate who had obtained a diploma in nursing from a hospital and was certified by the hospital as a pediatric nurse practitioner in 1977. She was “grandfathered” in as a nurse practitioner without having to obtain the current requirement of Baccalaureate and Masters of Science in Nursing. The nurse practitioner opened a solo practice and entered a collaborative agreement with a physician. However, the nurse practitioner never collaborated with her collaborating physician, as required.

The nurse practitioner treated the plaintiff’s baby during the first fourteen months of her life for numerous complaints and saw the baby 32 times during the first year. When the mother asked to have a physician see the baby, the nurse practitioner told her she only needed to see a physician for a hospital admission. Finally, in November, 2001, the mother took the baby to Women’s and Children’s Hospital in Lake Charles, where the baby was seen by the nurse practitioner’s collaborating physician. After running tests, the physician referred the baby to Texas Children’s Hospital for specialized care.

The baby was diagnosed with neuroblastoma. The nurse practitioner’s records documented signature symptoms of neuroblastoma in the baby at six months. The evidence at trial showed that, if neuroblastoma is diagnosed within the first year of life, the child has a 90% chance of an event free survival. However, because the neuroblastoma diagnosis was made when the plaintiff’s baby was over one year old, the baby suffered permanent injuries, and her quality of life was severely diminished.

At trial, the jury rendered a verdict in favor of the plaintiffs and awarded $6,000,000 in general damages; $629,728.24 in past medical expenses; $3,358,828.00 in future medical expenses; and $33,000 to the father and $200,000 to the mother for loss of consortium. The plaintiffs then filed a Petition for Declaratory Relief asserting the Medical Malpractice Act was unconstitutional. The Louisiana Patient’s Compensation Fund intervened to challenge the constitutional attack.

The trial court initially found the Act was constitutional, except for the inclusion of nurse practitioners as qualified health care providers. On reconsideration, the trial court found that the plaintiffs did not challenge the Medical Malpractice Act on the basis that the definition of a qualified health care provider was overly inclusive. Thus, the trial court found the constitutional challenge on that ground was not properly before the court and reinstated the cap on the damages.

On appeal, the plaintiffs argued the cap on damages violated several provisions of the Louisiana Constitution, but the Third Circuit addressed only the equal protection challenge. The Third Circuit relied on Supreme Court cases for the proposition that the “rational basis” to support the constitutionality of the Medical Malpractice Act offered by the State required a greater showing in cases involving severely or catastrophically injured victims. The court found that the Act created two classes—one class of medical malpractice victims who could receive full recovery for the injuries they sustained and another class of medical malpractice victims who, because of the severe injuries, could not receive full recovery. Thus, this statutory classification of victims disadvantaged or discriminated against one class by reason of or because of their physical condition, calling into question the equal protection rights of this class of victims.

The State had to show the law does not arbitrarily, capriciously, or unreasonably discriminate against the disadvantaged class, by demonstrating the legislative classification furthers a legitimate state objective. In this case, the State offered no evidence to refute the finding that the cap discriminated against the plaintiffs by limiting their damages to $500,000, less than the full recovery of their general damage and other awards. The State pointed to the stated purpose in lowering malpractice insurance costs for health care providers, which furthered the State’s legitimate objective in assuring accessible and affordable health care for its citizens. The State also pointed to the benefits to the plaintiffs from the increased likelihood that their healthcare providers would have malpractice insurance; the victim’s future medical expenses would be paid; and assurances that the claims would be paid from a solvent Patient Compensation Fund.

The Third Circuit rejected the evidence presented by the State, including expert testimony, that the cap still served a legitimate state interest. The Third Circuit relied on evidence that studies could not determine whether caps on damages had any impact on the amount of premiums charged by insurers. Nor did the State show there was a shortage of physicians in Louisiana or a correlative need for nurse practitioners to operate and own “walk in” clinics to make health care more affordable or available to Louisiana citizens.

The Third Circuit indicated that the medical profession would benefit for years to come in treating the victim of the nurse practitioner’s malpractice, while the plaintiffs would be subject to the ever dwindling value of the damages recoverable under the cap. The Third Circuit was very critical of the ability of the nurse practitioner, who held no advanced degrees and who failed to collaborate with a physician as required, to benefit from a limitation of her liability and to continue to operate a clinic and potentially subject other patients to substandard care, based on what the court described as gross negligence and incompetence.

The Third Circuit affirmed the trial court award of past medical expenses and judicial interest, as well as the future medical expenses, to be paid by the Patient’s Compensation Fund. The Third Circuit concluded the cap, to the extent it included nurse practitioners, violated the equal protection guarantees of the Louisiana Constitution and La. R. S. 40:1299.41(A)(1) and, thus, was unconstitutional. The Third Circuit reinstated the jury’s award of damages.

Because the Supreme Court vacated the Third Circuit ruling and remanded the case to the Third Circuit for an en banc hearing, it would appear at this time that nurse practitioners are covered by the Medical Malpractice Act, at least for alleged malpractice occurring on or after the effective date of the 2009 amendment to add nurse practitioners to the definition of covered health care providers. This case warrants close monitoring on the issue of whether nurse practitioners are covered by the Medical Malpractice Act, particularly considering the number of cases where the Third Circuit has found provisions of the Act to be unconstitutional.
 

The United States Supreme Court on March 21, 2011 denied a writ application by a physician who was appealing the lower Federal court’s decision dismissing the physician's civil rights action against the University of Illinois where the physician alleged numerous violations of his constitutional rights. See Abcarian v. McDonald, 617 F.3d 931 (7th Cir. 2010), writ denied, No. 10-913 (2011). The physician had been the head of the Department of Surgery at the University when he was notified that a lawsuit was being contemplated against him due to the death of a former patient. The physician alleged that when the University learned of the potential lawsuit it conspired with other defendants to discredit the physician's reputation and executed a settlement agreement with the deceased's family. The physician further alleged that the settlement agreement was a step in a conspiracy to destroy his reputation because the settlement agreement was entered merely so the defendants could report the settlement of the medical malpractice claim to the Illinois Department of Financial and Professional Regulation and the National Practitioner Databank. The physician filed suit alleging free speech, equal protection and procedural due process claims against the defendants.

The physician also argued that the defendants violated his equal protection rights by reporting the settlement involving him, but not the settlement of a medical malpractice claim against another physician. The Court of Appeal held that the District Court correctly dismissed the equal protection claim because under the law the defendant had no discretion in deciding whether to report the settlement. Because the defendants lacked discretion to report the settlement, the Court found that there is little risk of the kind of discriminatory action addressed by the 14th Amendment.

The physician also alleged that defendants violated his procedural due process rights by reporting the settlement to state and national authorities. The physician alleged the defendants defamed him and infringed his liberty to pursue his chosen occupation. However, the Court of Appeals held that in order for the physician to have a due process claim, the physician must plead a constitutionally relevant tangible loss of his employment opportunities and that his good name, reputation, honor, or integrity was called into question in a manner that makes it virtually impossible for him to find new employment in his chosen field. The physician in this case could not meet his burden because he still had his job at the University as a physician and a professor.

The physician had only alleged fear that he would not be able to be employed at additional healthcare institutions in the future. The Court of Appeals found that a physician cannot be denied liberty to pursue a particular occupation when he continues to hold the same job and the same occupation. The Court of Appeals also held that while a physician has a property interest in a medical license free from formal disciplinary sanction imposed without due process, a physician does not have a due process right to be exempt from the formal disciplinary processes itself.

The Court of Appeals decision upholding the dismissal of the physician’s civil rights claims is final due to the U.S. Supreme Court denying the physician’s writ application.
 

Following the passage of H.R. 3950, the House of Representatives passed H.R. 4872, the Health Care and Education Affordability Reconciliation Act of 2010, by a vote of 220 to 211. This second bill by the House modifies the Senate bill (H.R. 3590), and H.R. 4872 will serve as the foundation for any changes made by Congress to the current healthcare delivery, payment and insurance system. Some of the insurance-related changes that may have immediate impact include: lifetime caps on coverage end; children can stay on parents’ policies until age 26, and insurance companies can’t cancel coverage except in the case of fraud. A significant issue of addressing the Medicare physician payment formula still remains unresolved, as well as medical liability reform.

The changes addressed in H.R. 4872, sought by House Democrats and President Obama, will be considered by the Senate under budget reconciliation rules requiring a simple majority to pass and send it to President Obama for his signature. Senate Republicans have stated their intention to offer numerous amendments and raise multiple points of order to the legislation. If the H.R. 4872 is changed in any way prior to Senate approval, it must return to the House for an additional vote before President Obama can sign it.
 

In April, 2009, the United States Court of Appeals for the Sixth Circuit decided in reviewing a Michigan case that the representative of a deceased woman could sue a hospital under EMTALA for allegedly releasing her husband after admission to the hospital, when he was then hallucinating, disoriented, and behaving in a threatening manner toward her when he was brought to the emergency department.  Five days after admission, it was decided that the husband should be transferred to a facility for the acutely mentally ill.  However, the transfer did not occur and he was, instead, released seven days after admission.  Ten days later, he murdered his wife.

The trial court decided that regardless of whether or not a non-patient can sue under EMTALA, the suit against the hospital could not go forward because the patient was screened in the emergency room and no emergency medical condition was recognized.  The Court of Appeal reversed this decision and returned the case to the trial court.

The Sixth Circuit reasoned that a non-patient can be an EMTALA plaintiff. The Court stated that “any individual who suffers personal harm as a direct result of a hospital’s EMTALA violation may sue.”   Such an individual is not limited to the patient.  The Court dismissed “an isolated statement in a [congressional] committee report to the contrary.”

On the question of whether the hospital’s EMTALA obligation ends once a patient is admitted, the Court said no.  The patient who presents with an emergency medical condition must be stabilized, not just admitted and tested.  The hospital may not admit and then discharge to avoid its stabilization requirement.  The Court took this position despite the existence of a Centers for Medicare and Medicaid Services (CMS) regulation to the contrary.  The Court reasoned that the CMS regulation does not comport with the language of EMTALA.

This case can be found at Moses v. Providence Hospital and Medical Centers, Inc., 561 F.3d 573 (6th Cir. 4/6/09). A petition for further review was filed with the United States Supreme Court in October, 2009. The Supreme Court apparently has not yet decided whether it will accept the case.
 

The Louisiana Supreme Court has issued two decisions in the past year, Borel v. Young and Warren v. LAMMICO, which are favorable to Louisiana health care providers. In the Warren case, a potential plaintiff waited almost four years from the date of her father’s death to file a wrongful death and survival claim against the health care providers.  The plaintiff had not participated in the Medical Review Panel or filed a lawsuit within either the one and three year prescriptive periods (a.k.a. statute of limitations) required by La. R.S. 9:5628.  The plaintiff’s mother and sister had already filed a timely complaint with the Louisiana Patients’ Compensation Fund, proceeded with a Medical Review Panel, and subsequently filed a lawsuit.  The issue before the Court was whether the new plaintiff could file her own wrongful death and survival claim that would “relate back” to the original, timely claims of her mother and sister.

Te Louisiana Supreme Court followed this same line of reasoning in an earlier decision, Borel v. Young, where it addressed the issue of late-added defendants. In Borel, the plaintiffs attempted to file suit against a new defendant after the prescriptive period had already run by arguing that the defendant was jointly liable with the original defendants and prescription was interrupted under the general Louisiana Civil Code article 2324.  The Court held, as it did in Warren, that the more specific provisions of the Medical Malpractice Act regarding prescription apply to the exclusion of the general code article on the interruption of prescription against joint tortfeasors found in La. C.C. Art. 2324.

With the Warren and Borel decisions, the Supreme Court has now held that for both late-added plaintiffs and late-added defendants, the more specific provisions of the Medical Malpractice Act and La. R.S. 9:5628 regarding prescription apply to the exclusion of any general code articles on the interruption or suspension of prescription in medical malpractice cases.  For example, a patient cannot file suit against a hospital and then wait several years to amend his lawsuit to name the doctor who treated him at the hospital as a defendant.  Also, if a patient dies and leaves a wife and two children, but only the wife and one child decide to file a lawsuit, the second child cannot wait until years after the lawsuit is filed to join in the lawsuit as a plaintiff.

In this day and age, everyone communicates by e-mail, on a laptop, desktop, Blackberry or other electronic device. But what about communication between a physician and a patient?  

Is this permissible? Acceptable under existing law and practice? Recommended?

Obviously, any form of communication between a physician and a patient is allowed. So, if you wish to discuss with a patient their history, your impressions, diagnosis, prognosis or other issues relating to evaluation and treatment, you may. However, this form of communication carries with it certain special rules and requirements. Which leads us to our second question.

Acceptable?

Any communication by a physician with a patient should be documented. In the olden days, this may have involved a small spiral notebook with entries made from phone calls received at home and later placed in the patient’s office chart. Now, in the era of electronic communication, the initial consideration is how will this “e-mail” be stored or maintained. Will a copy of the e-mail be printed and placed in the patient’s chart? Will electronic folders for each individual patient be created? Will a dedicated hard drive and back-up system be implemented? There are any number of alternatives in this regard. The bottom line is that an e-mail from the physician to a patient which relates, in any material way, to treatment should be available for review by others involved in the patient’s care and preserved as a contemporaneous documentation of the physician’s evaluation/thought process.

Perhaps, more importantly is that under existing law, in legal cases and in the potential for litigation, there is a duty to preserve electronic data. Accordingly, in the event a physician elects to communicate electronically with a patient, to any degree, about treatment, and that treatment becomes the subject of a medical malpractice claim or lawsuit, then there is an underlying duty to preserve such electronic communications that may have relevance to the litigation. Even more problematic is that this duty to preserve electronic data arises at the time a physician has some “notice” of the potential for a malpractice claim to be filed. Under those circumstances, the physician would have a duty to place a “legal hold” on any electronic data that was created in connection with the patient’s care and treatment. For example, if test results were communicated electronically to a patient, then these e-mails documenting the lab results being sent to the patient would need to be preserved. If the electronic communication was sent by other staff members in a physician’s office, then the physician or office administrator, under existing rules, should notify all such involved parties of the responsibility to preserve the electronic data, known as a “legal hold”.

In the extreme, in a situation in which the physician was unable to locate and produce electronic data upon which that physician relied for the appropriateness of the medical treatment at issue, then there could be evidentiary presumptions against the physician for failing to preserve the electronic data. There also are sanctions for mishandling discovery of electronic data which can be significant. These can involve monetary fines, and even adverse inferences in instructions to juries. Additionally, reconstruction or recovery of electronic data can be expensive and time-consuming.

Recommended?

Electronic medical records systems will continue to develop. The future is electronic medical records and the future is now. However, until these systems are developed and become more of a generally accepted manner of medical practice, it is recommended that electronic communication with patients be kept to a minimum or not employed, unless and until the physician or physician group has a complete system in place to store, save, back-up and search all electronic data related to patient communications. At the very least, the physician or practice manager should consult with information technology and support personnel to best manage this potential exposure.
 

The Louisiana Supreme Court issued its new opinion after a rehearing in Borel v. Young, again affirming the Third Circuit’s ruling and dismissing the lawsuit against late-added physician defendants, but on different grounds. The supreme court’s decision on rehearing solved an apparent dilemma for the plaintiffs created by the original opinion: the plaintiffs were precluded from filing suit until after the medical review panel had rendered an opinion but, in any case, were required to file suit within three years of the alleged medical malpractice. Since the three year period could not be suspended during the pendency of the medical review panel, the plaintiffs faced the possibility that their claims would be barred by the three-year peremptive period before the panel convened to consider their claims.

In the original opinion, the supreme court held that La. R. S. 9:5628 set a one-year prescriptive period and a three-year peremptive period for bringing a medical malpractice claim.    The supreme court held that a claim for medical malpractice was extinguished if brought against a health care provider more than three years after the date of alleged medical malpractice. The three year peremptive period could not be suspended, interrupted, or revoked. On rehearing, the supreme court reaffirmed its prior decision, holding that both periods were prescriptive, subject to suspension, interruption, or revocation.  

Prescription is interrupted against when a lawsuit is filed. However, prescription may be suspended for various reasons. For example, prescription is suspended when a medical review panel request is timely filed and remains suspended for 90 days after notification by certified mail of the medical review panel opinion. Also, prescription may be suspended under the doctrine of contra non valentum, where a plaintiff did not know and could not have reasonably discovered the cause of action. This “discovery rule” allows a plaintiff to file a claim within one year of the date of discovery of the negligent act or omission giving rise to a claim, even if that is more than one year from the date of the alleged negligence. The supreme court, on rehearing, also interpreted La. R. S. 9:5628 as making the discovery rule exception to prescription inapplicable after three years from the date of alleged medical malpractice, thus setting a maximum three year period for a medical malpractice claim to be filed.

In explaining its decision on rehearing, the supreme court stated the filing of an initial request for a medical review panel suspended the running of prescription against all alleged joint or solidary defendants, until 90 days after the notification as required of the medical review panel opinion. This suspension protected plaintiffs who were required to submit their claims to a panel before filing suit. Once the suspension ended, the plaintiffs had any remaining time left in the prescriptive period to file suit against the health care provider defendants named in the request for the medical review panel. The supreme court confirmed that the more specific provisions of the Louisiana Medical Malpractice Act, rather than the general Civil Code provisions, applied regarding the interruption of prescription against jointly liable defendants. Thus, in Borel, the claim against the defendant physicians were prescribed, even though suit was timely filed against another defendant health care provider, because the physicians were not added to the lawsuit for more than three years after the alleged medical malpractice.  Ordinarily, prescription would be interrupted as to all defendants who are jointly or solidarily liable, when a lawsuit is filed against any one of them.

The Borel opinion, on rehearing, seems to have eliminated the bright line rule created in the original opinion that a lawsuit alleging medical malpractice, under all circumstances, must be filed no later than three years after the date of alleged malpractice. However, the opinion on rehearing affirms that the special rules set forth in the Medical Malpractice Act operate to the exclusion of the more general rules related to interruption of prescription and also affirms that the discovery rule, which would otherwise suspend the prescriptive period, ceases to be applicable after three years from the date of the alleged malpractice. Thus, the ultimate result reached is the same as in the original opinion. 

The Louisiana Supreme Court recently held in Borel v. Young that La. R. S. 9:5826(A) provided for both a one year prescriptive period and a three year peremptive period to file a claim for medical malpractice. The decision in Borel made it clear that a plaintiff had to file suit against a health care provider no later than three years from the date of the alleged act, omission, or negligence giving rise to the claim. Otherwise, the plaintiff’s action would be extinguished, and all rights to pursue the action would be lost. This ruling was favorable to health care providers, as it protected them from stale claims being brought years after the date of the alleged malpractice. However, the Louisiana Supreme Court granted a rehearing of the Borel v. Young case on May 21, and it remains to be seen whether the current ruling will stand or whether it will be modified or vacated.

La. R. S. 9:5826(A) governs the time limitations in which a party may bring a medical malpractice action against a health care provider. To understand the significance of the Borel ruling, one must understand the crucial difference between a prescriptive period and a peremptive period. A prescriptive period designates the deadline by which an action must be brought. However, prescriptive periods can be suspended, interrupted, or renounced by a variety of occurrences. Peremption is defined as a period of time fixed by law for the existence of a right. Unlike a prescriptive period, a peremptive period cannot be renounced, interrupted or suspended. Therefore, the right to bring an action against a health care provider would cease to exist if not timely exercised within three years after the date of the alleged act, omission or negligence.

On February 2, 2007, the Louisiana Supreme Court vacated [Footnote] two decisions out of the Louisiana Third Circuit (Lake Charles), Taylor v. Clement and Arrington v. Galen-Med., Inc. et al. Taylor/Arrington garnered much attention in September 2006 when the Third Circuit declared Louisiana's medical malpractice cap, La. R.S. 40:1299.42(B) (a statute that has survived countless constitutional challenges since its enactment in the mid-1970s), unconstitutional. The Third Circuit reasoned that the $500,000 cap on damages did not provide the plaintiffs with "an adequate remedy" when considering the purported diminution of the cap over time due to inflation. The adequate remedy challenge to the constitutionality of a statute is derived from Article I, Section 22 of the Louisiana Constitution. Under current law, the $500,000 cap does not include future medical care costs and related expenses; it does, however, include pain and suffering, lost wages and other damages. 

The Louisiana Supreme Court's decision preserves the constitutionality of Louisiana's medical malpractice cap for the present time. It is unclear whether the Third Circuit will address the constitutionality of the cap on remand, but the possibility still remains that the Third Circuit could declare the cap unconstitutional again on the same or other grounds. Such a decision could take up to 1 to 2 years, or more, to transpire, depending on whether the Third Circuit rules on the record before it or decides to remand the case to the trial court for further proceedings. The ruling is good news for health care providers in the short term. The ruling does not, however, provide any long term stability regarding the cap and its continued viability. Nor does the ruling lend guidance to the State Legislature, should it decide to address the state's medical malpractice cap in the future.

Footnote: The word "vacate" in this sense means that the judgment was annulled, set aside or made legally void. 

As most are aware, the Third Circuit Court of Appeal in Lake Charles recently ruled the medical malpractice cap unconstitutional.  The decision will be reviewed by the Louisiana Supreme Court, a process that could take anywhere from three to twelve months.  In the meantime, the cap is still applicable.

By comparison, the majority of states have some form of cap on noneconomic damages according to the National Conference of State Legislatures as of 2005.  Louisiana is one of those states.  Ten states cap nonecomomic damages for medical malpractice claims with caps ranging from $150,000 to $1 million.  Twenty-two states have some form of cap on noneconomic damages, although not specifically limited to medical malpractice claims.  Out of these 32 states, 11 also have a form of cap on punitive damages.

A minority of states either constitutionally prohibit limits on damage awards, have state supreme court decisions finding such caps unconstitutional, prohibit caps on damages by statute, or simply have no limitations.  Whether Louisiana joins the minority of states depends on the ruling of the Louisiana Supreme Court.  We will continue to monitor the proceedings with the Louisiana Supreme Court and report any future ruling as soon as it is available.

          The Centers for Medicare and Medicaid Services (“CMS”) recently issued an advisory opinion on November 6, 2006 regarding the physician recruitment exception in the federal physician self-referral law, commonly know as the Stark Law. CMS specifically addressed whether a physician who would spend up to 20% of their time practicing outside of the recruiting hospital’s geographic service area would meet the relocation requirement of the physician recruitment exception to the Stark Law.

          Under the proposed recruitment arrangement, the recruiting hospital would provide the following loans to the physician directly:

                     (1)      A loan for the payment of the physicians moving and relocation expenses, which would be forgiven after 1 year;

                     (2)      A loan equal to the physicians first year medical malpractice premium not to exceed $10,000.00, which would be forgivable over 3 years; and

                     (3)      A loan to repay the physicians medical school loans, which would be forgivable over a 3 year period.

          The recruiting hospital would provide no other compensation that either the practice to the physician is joining or to the physician in connection with the proposed recruitment arrangement. In addition, the forgiveness of the loans would be based on the physician meeting certain service and other commitments.

          The statutory language of the Stark Law and the regulations adopted by CMS both contain an exception for certain remuneration paid by a hospital to induce a physician to relocate his or her medical practice to the geographic area served by the hospital. The Stark Law regulations define the geographic area served by the hospital as the area composed of the lowest number of contiguous zip codes from which the hospital draws at least 75% of its inpatients. The physician recruitment exception to the Stark Laws contains the following conditions:

                     (1)      The recruitment arrangement must be set out in writing and signed by the parties, including the party to whom the payments are made directly (e.g. physicians practice if applicable);

                     (2)      The recruitment arrangement is not conditioned on the physicians referral of patients to the recruiting hospital;

                     (3)      The remuneration from the recruiting hospital is not determined in a manner that takes into account “directly or indirectly” the volume or value of any actual or anticipated referrals by the recruited physician or by the physician’s practice (or any physician affiliated with the physician’s practice) receiving the direct payments or any other business generated between the parties; and

                     (4)      The recruited physician is allowed to establish staff privileges at other hospitals and refer business to any other entities. The recruitment exception also contains certain conditions if a hospital is also providing an income guaranty to the recruited physician.

          In the proposed recruiting arrangement, a hospital and practice would jointly recruit a physician to provide services to patients at three locations of the practice, and one of the locations is not within the boundary of the geographic area served by the hospital as defined in the Stark Law regulations.

          CMS commented that “there is no explicit requirement in the physician recruitment exception of the Stark Law that the recruited physician spend 100% of his or her medical practice time in the geographic area served by the hospital.” However, CMS emphasized that they may reach a different conclusion if the time spent by the recruited physician outside of the geographic area would be more substantial than under the proposed arrangement (i.e., 20%).

          A potential message to take from this advisory opinion is that a recruited physician does not have to spend 100% of his or her medical practice time in the geographic area served by the recruiting hospital. However, CMS made it clear that an arrangement may not meet the physician recruitment exception if the recruited physician practices medicine greater than 20% of his or her time outside of the recruiting hospital’s service area.