Like swimmers wading back into the water after a shark attack, many hospitals have resumed aggressive physician recruitment schemes in the belief that the danger of getting in real legal trouble with the feds has passed.
That key finding of MODERN HEALTHCARE's annual hospital physician recruitment survey represents a major change from past survey information that indicated hospitals were becoming more skittish about dangling financial incentives in front of doctors.
This year's physician recruitment survey is the fifth annual exclusive report on what hospitals are doing to attract the doctors they want. It's conducted on MODERN HEALTHCARE's behalf by Cejka & Co., a St. Louis-based physician recruitment company.
Some 269 hospitals and hospital systems responded to this year's survey, which was conducted in the spring. That's down from last year's total of 431 hospital respondents (Aug. 21, 1995, p. 88). Consequently, year-to-year comparisons may be misleading.
Of this year's respondents, 192, or more than 70%, were not-for-profit hospitals, whose tax-exempt status could be jeopardized by improper physician recruitment activities. Also, most of the respondents were located in rural or suburban areas. Only 62, or 23%, were urban hospitals. The bulk of the hospitals-more than 55%-had between 100 and 250 beds.
Of the hospitals that responded to this year's survey, 92% said they were actively recruiting physicians this year. That's up from last year, when 87% of the respondents were looking for more doctors.
The most sought-after physicians continue to be those in the primary-care specialties. For example, nearly 70% of the hospitals were actively trying to recruit family practitioners, while more than half were looking for internists (See chart). In least demand again were oncologists, neurosurgeons and radiologists. They were being recruited this year by 5.9%, 8.9% and 9.3% of the hospitals, respectively.
What has changed this year, however, appears to be the extent to which hospitals are willing to go to attract the physician of their dreams.
In 1993, the survey was the first national study to document the fact that many hospitals were toning down their physician recruitment activities because of the potential legal pitfalls (July 26, 1993, p. 22). That finding was repeated in the 1994 and 1995 surveys.
Not-for-profit hospitals that are too generous to physicians whom they want on staff can risk losing their status as tax-exempt public charities under Section 501(c)(3) of the federal tax code. The code prohibits the earnings of a tax-exempt organization to "inure," or benefit, private individuals. Tax-exempt organizations also must operate for the benefit of the public, not for the interests of private individuals.
Also, any hospital, regardless of ownership status, can run afoul of the federal Medicare and Medicaid fraud-and-abuse statutes by being too generous to physicians. The anti-kickback provisions of the fraud-and-abuse statutes bar any form of remuneration to induce the referral of Medicare or Medicaid patients or any business related to either federal insurance program.
Over the past several years, a number of legal developments drove the risks home for many hospitals.
For example, Congress passed what's referred to as the "Stark II" legislation in 1993 that bars physicians from referring patients to a number of healthcare facilities in which they have an ownership stake, including inpatient and outpatient hospital services.
In 1994, Hermann Hospital in Houston paid a $1 million fine and agreed to a set of physician recruitment guidelines to resolve charges by the IRS that the hospital violated the conditions of its tax-exempt status by offering lucrative recruitment incentives to doctors.
And in 1995, the IRS followed up the Hermann settlement with a proposed revenue ruling that gave examples of proper and improper physician recruitment tactics used by hospitals.
But, three years after Congress passed Stark II, HHS has yet to issue proposed regulations to implement the law. And the IRS has yet to complete its proposed ruling on physician recruitment strategies.
The government's failure to follow through with the measures, at least to date, apparently has many hospitals willing to tread back into the risky waters of aggressive physician recruitment schemes, particularly as local healthcare markets become increasingly competitive.
About 71% of the hospitals that responded to this year's survey said there haven't been any recent legal developments regarding physician recruitment that have changed their method of attracting physicians. That is up significantly from last year's survey, when about 59% of the respondents said such a legal development didn't prompt them to adjust their recruitment practices.
In last year's survey, about 69% of the hospital respondents cited the Hermann Hospital settlement as the catalyst for them pulling back on risky recruitment strategies. About 14% cited the Stark II legislation as the cause of their fears. This year, only 41% of the hospitals that pulled back cited the Hermann Hospital settlement as the cause. The share of hospitals worried about Stark II crept up to about 19%.
Consequently, the number of hospitals that shelved specific recruitment arrangements because of the legal risk plummeted this year, the survey found.
For example, the percentage of hospital respondents that said they stopped paying signing bonuses to new physician recruits dropped to about 10% this year from nearly 21% last year. The same pattern occurred for 13 other recruitment tactics, ranging from giving physicians free office space to forgiving loans to help them start their new practices (See chart).
The survey documented the practice acquisition craze many hospitals are pursuing in spite of any perceived legal risk. Less than 1% of the hospitals surveyed said they stopped acquiring practices last year because of the legal risk. Conversely, more than 18% said they bought a practice last year, up from about 9% in 1992, the first year the survey was done.