Sources: 42 C.F.R. § 411.357(t)

15. (Physician) Retention Payments in Underserved Areas

Payments by a (1) hospital, (2) rural health clinic, or (3) federally qualified health center ((1), (2) and (3) are hereinafter referred to collectively simply as “a hospital”) directly to a physician on the hospital’s medical staff to retain the physician’s medical practice in the “geographic area served by”* the hospital if all of the following conditions are met:

1.  The physician has a bona fide firm, written recruitment offer or offer of employment** from a hospital, academic medical center, or physician organization that is not related to the hospital making the payment, and the offer specifies the remuneration being offered and requires the physician to move the location of his or her medical practice at least 25 miles and outside of the geographic area served by the hospital making the retention payment;
2.  The retention payment does not exceed the lower of:

(A) the amount obtained by subtracting the physician’s current income from physician and related services from the income the physician would receive from comparable physician and related services in the written recruitment or employment offer, provided that the respective incomes are determined using a reasonable and consistent methodology, and that they are calculated uniformly over no more than a 24-month period; or
(B) the reasonable costs the hospital would otherwise have to expend to recruit a new physician to the geographic area served by the hospital to join the medical staff of the hospital to replace the retained physician;

3.  The arrangement is set out in writing and signed by both parties;
4.  The physician is not required to refer to the hospital;
5.  The remuneration is not determined in a manner that takes into account referrals;
6.  The physician is not precluded from establishing staff privileges at another hospital or referring business to another entity;
7.  The retention payment is subject to the same obligations and restrictions, if any, on repayment or forgiveness of indebtedness as the written recruitment offer or offer of employment;
8.  Either:

(A) the physician’s current medical practice is located in a rural area or HPSA (regardless of the physician's specialty) or is located in an area with demonstrated need for the physician as determined in an advisory opinion; or
(B) at least 75% of the physician’s patients reside in a medically underserved area or are members of a medically underserved population;

9.  The hospital does not enter into a retention arrangement with a particular referring physician more frequently than once every 5 years;
10.  The amount and terms of the retention payment are not altered during the term of the arrangement in any manner that takes into account the volume or value of referrals or other business generated by the physician;
11.  The arrangement does not violate the anti-kickback statute or any billing or claims submission laws or regulations.

* The “geographic area served by” a recruiting hospital is defined as area composed of the lowest number of contiguous zip codes from which the hospital draws at least 75% of its inpatients. There is a special optional rule for rural hospitals. In the case of a hospital located in a rural area, the “geographic area served by” the hospital may also be the area composed of the lowest number of contiguous zip codes from which the hospital draws at least 90% of its inpatients.

** Retention payments are permitted in the absence of a bona fide firm, written recruitment or employment offer if conditions iii. through xi. above are all satisfied, and, in lieu of conditions i. and ii. above being satisfied, the following 3 conditions are satisfied:

1.  the physician furnishes to the hospital before the retention payment is made a written certification that the physician has a bona fide opportunity for future employment by a hospital, academic medical center, or physician organization that requires the physician to move the location of his or her medical practice at least 25 miles and outside the geographic area served by the hospital. The certification contains at least

(A) details regarding the steps taken by the physician to effectuate the employment opportunity;
(B) details of the physician’s employment opportunity, including the identity and location of the physician’s future employer or employment location or both, and the anticipated income and benefits (or a range for income and benefits);
(C) a certification that the future employer is not related to the hospital making the payment;
(D) the date on which the physician anticipates relocating his or medical practice outside of the geographic area served by the hospital; and
(E) information sufficient for the hospital to verify the information included in the written certification;

2.  the hospital takes reasonable steps to verify that the physician has a bona fide opportunity for future employment that requires the physician to relocate outside the geographic area served by the hospital; and
3. The retention payment does not exceed the lower of (A) an amount equal to 25% of the physician’s current income (measured over no more than a 24-month period), using a reasonable and consistent methodology that is calculated uniformly; or (B) the reasonable costs the hospital would otherwise have to expend to recruit a new physician to the geographic area served by the hospital to join the medical staff of the hospital to replace the retained physician.

Stark General Exception