The complex landscape of healthcare delivery involves regulations governing financial relationships between physicians and the entities to which they refer patients. These rules maintain the integrity of medical decision-making by separating patient care from financial gain. A specific provision, the Primary Care Exception, permits arrangements that would otherwise be prohibited, aiming to address recognized needs within the health system. This measure facilitates the provision of frontline medical services.
The Need for Healthcare Exceptions
The foundation of this regulatory environment is the federal physician self-referral law, commonly known as the Stark Law. This statute prohibits a physician from referring Medicare or Medicaid patients for certain “Designated Health Services” (DHS) to an entity if the physician has a financial relationship with that entity.
The law prevents conflicts of interest that could lead to overutilization of services or inflated healthcare costs. If a financial arrangement exists, the law assumes the potential for that relationship to improperly influence referral decisions, such as ordering unnecessary diagnostic scans.
However, the rigidity of this prohibition created barriers to legitimate arrangements intended to improve patient access. Strict liability under the Stark Law means even inadvertent violations can lead to severe penalties. To allow for necessary, beneficial relationships while guarding against fraud, the law includes numerous exceptions, each with specific requirements. One exception was created specifically to address the need for primary care providers.
Defining the Primary Care Exception
The Primary Care Exception allows certain entities to provide financial assistance to a physician or group practice to recruit and employ a non-physician practitioner (NPP). Without this exception, the assistance could be viewed as illegal remuneration in exchange for referrals, violating the Stark Law.
The exception permits hospitals, Federally Qualified Health Centers (FQHCs), and Rural Health Clinics (RHCs) to provide this support. This support facilitates the hiring of NPPs who provide primary care or mental health services. The NPPs covered under this exception include:
- Physician assistants
- Nurse practitioners
- Clinical nurse specialists
- Certified nurse midwives
- Clinical social workers
- Clinical psychologists
The exception directly responds to shortages in the primary care workforce, recognizing the value of NPPs in delivering frontline services. It encourages the expansion of primary care access without compromising the self-referral law. The assistance offsets the initial costs associated with recruiting and establishing a new provider in a practice.
Strict Conditions for Compliance
To qualify under the Primary Care Exception, the arrangement must satisfy mandatory requirements designed to prevent abuse. The entire arrangement must be set out in a written agreement signed by the assisting entity, the physician, and the NPP. Crucially, the agreement cannot condition the assistance on the volume or value of referrals made to the assisting entity.
The NPP’s services must predominantly focus on primary care or mental health, requiring that at least 75% of the NPP’s patient care services meet this definition. The assistance provided by the entity is capped, and may not exceed 50% of the NPP’s aggregate compensation and benefits over the first two years. This limitation ensures the physician or practice bears a substantial portion of the financial risk.
The exception is restricted to new recruitment efforts. The NPP cannot have practiced in the geographic area served by the assisting entity within the year prior to the arrangement’s commencement. Furthermore, the entity may only use this exception with a particular physician practice once every three years, and the assistance is limited to the first two years of the NPP’s engagement.
Improving Access in Underserved Areas
The public policy driving the Primary Care Exception centers on improving the availability of medical services in areas with the greatest need. The exception incentivizes the recruitment of NPPs to medically underserved locations where primary care physicians are scarce. Allowing hospitals and clinics to provide support helps overcome market challenges in attracting providers to rural or low-income areas.
The exception targets recruitment to the service areas of hospitals, FQHCs, and RHCs, which often serve populations designated as having a shortage of health professionals. Permitting these entities to share the burden of hiring NPPs facilitates the expansion of the clinical workforce. This increases capacity for routine medical care and mental health treatment in communities that would otherwise struggle to find providers.