We are increasingly seeing attention on physician compensation issues, especially in light of the increased consolidation of physician practices into hospital systems. Setting appropriate compensation is a critical compliance issue for the hospital and physicians. The recent ruling by the U.S. District Court in the Middle District of Florida regarding Halifax Hospital Medical Center’s compensation of employed oncologists highlights the Stark law issues inherent in compensation methodologies.

A federal judge in the case, United States et al. v. Halifax Hospital Medical Center et al., ruled that Halifax Hospital in Daytona Beach, Fla., gave bonuses to six oncologists that increased as the physicians directed more patients to the hospital for treatment, according to a Modern Healthcare report. The court ruled that this "incentive bonus" violated the Stark law’s prohibition on paying physicians in such a manner that encourages referrals of Medicare patients.

The case is now scheduled to go to trial next spring, with a jury tasked with determining how much Medicare oncology revenue was at issue and whether Halifax Hospital’s conduct also violated the False Claims Act. If the jury rules in favor of the government on its False Claims Act claims, Halifax Hospital’s damages could exceed $1 billion.

The court’s order can be found by clicking here (pdf).