It is common practice for physicians to enter into a “Physician Recruitment Agreement” or “Physician Recruitment Arrangement” (“PRA”) with a hospital or other medical facility, and such agreements are intended to offer certain incentives to the physician in exchange for relocation of the physicians or the physician’s existing practice to the geographical area of the hospital or other medical facility. The agreements can be for up to three years, and the incentives to a physician often include, an income guarantee for a specified period of time, payment of moving or relocation expenses, a sign-on bonus, etc.; all of which are intended to allow the physician to establish or re-establish their practice in a new geographical area, with little risk to the success of their practice.
Some physicians, may elect to sign a PRA for a shorter duration than the allotted three-year period most likely to reduce their payback obligation under the PRA and believing that a lesser time period will be sufficient to make a successful transition. If circumstances change (such as with the Covid-19 pandemic) that negatively impacts the successful transition of the physician practice, a request to extend the term by amending the PRA may be considered. An interesting question arises then in whether or not extending an original term is allowed?
This question has been addressed by the Centers for Medicare and Medicaid Services (CMS) and under pertinent sections of the Social Security Act. The broad answer is that PRAs can be amended, so long as the amendment does not provide additional, or potentially additional, compensation to the physician. However, the caveat is that a PRA can not be extended to provide for a longer period of guaranteed income because the agreement is signed in consideration of the physician’s relocation, and an extension would be signed only after the physician has already relocated, and therefore there is no additional consideration to support the extension. The blanket Stark Law waivers do not apply to PRAs and so neither physicians nor the hospital or medical facility, may extend these agreements, even if the extension is to address a disruption to the physicians practice due to the Covid-19 pandemic.
If you have signed or are considering signing a PRA or a similar agreement, please contact the attorneys at Thomas Law Group with any questions you may have or to have an attorney review the terms of the agreement.