This paper examines the issue of financial kickbacks in the health care industry within the context of a hypothetical case. The elements of the case are as follows:
The analytical perspective is that of head administrator at Sundown Community Hospital (a hypothetical institution)
The Sundown Board of Directors has directed the head administrator to enter into a joint venture agreement with Central Park Medical Group, a hypothetical physician group practice entity, whose patient population is comprised of 60 percent Medicare patients
The Board of Directors has authorized the head administrator to offer the physician group practice incentives (permanent staff privileges at Sundown and a procedure to provide monthly bonuses) to enter into the joint venture agreement
The case analysis focuses on two questions. These questions are as follows:
What concerns should the head administrator have entering the negotiations with the physician group practice because of potential conflicts between (a) the Board's instructions and (b) federal law related to kickbacks?
What should be the recommendations of the head administrator in relation to the structure of a joint venture between the hospital and the physicians group practice entity?
Federal anti-fraud efforts, including kickback arrangements, have been increasing in intensity since 1997 (Fisher, 1997). The head administrator, thus, should be concerned about close federal scrutiny of any joint venture arrangement between the hospital and the physicians group practice.
The federal Anti-Kickback Statute is an integral part of the federal Internal Revenue Code. The Statute is known generally as the Stark Legislation. Provisions of the Stark Legislation (Henry, 1999):
Prohibit the offer, solicitation, payment or receipt of remuneration if the intent is to induce referrals
Are relevant to contracts and arrangements, including joint ventures, involving referral sour...