Marketers: Don’t Be Spooked By Stark

Patrick T. Buckley, for HealthLeaders Media , May 14, 2008

Many healthcare marketers are wondering how the recently-implemented Stark "Phase III" fraud and abuse regulations tangibly affect their ability to market to and for physician practices. Hospital marketers want to know, for example, how much they can spend to advertise physicians' services, who can or cannot appear in an ad, what the ad can say, who needs to be invited to hospital-sponsored programs where a medical staff physician speaks on a healthcare subject, and how the regulations affect the call center's activities.

These are all legitimate concerns, as failure to meet the Stark III regulations, even unknowingly, can result in potential loss of Medicare and Medicaid funds.

The Stark rules were initially instituted to prevent physicians from referring Medicare and Medicaid patients to certain health services from which they would stand to benefit financially because of a personal ownership or similar financial interest. Hospitals are prevented from attracting physician referrals through conveyances such as gifts, financial arrangements that are less than fair market value, and other like practices designed to encourage channeling of patients to their facility. Unless they meet certain exemptions, hospitals must not favor or even give the appearance of promoting the channeling of patients to physicians or designated health services in their marketing of physicians. Figure 1 describes various marketing activities and scenarios and how they might be judged according to the regulations.

(Note: The marketing of physicians' services is very fluid. What's in vogue today may be verboten tomorrow. Marketers are advised to consult professional counsel for specific legal, ethical, or clinical questions relating to the Stark regulations.)

See Figure 1, the Stark law's impact on hospital's marketing of non-employed physicians.

One approach to physician marketing
Midwest Health System (not its real name) owns a multi-specialty group that accounts for approximately 30% of hospital admissions and 40% of revenue. It also has a strong relationship with a large independent multi-disciplinary group practice from which it receives 60% of its admissions. There are also independent physicians (solos and small groups) on staff who account for the remainder of admissions.

As might be expected, all three groups of physicians felt that they should receive marketing support from the health system, and the marketing department was concerned that the non-employed physicians might perceive favoritism in the system's advertising.

The burning question: How to keep everybody productive, cooperative, and focused on customer satisfaction as opposed to questioning whether one physician is getting more than another.

The answer was to focus on the bigger picture such as what could be done to enhance relationships between the entire medical staff and hospitals, ways to enhance patient care relations and processes, and ways to enhance clinical programs and services to sustain quality of patient care. By taking this approach, the marketing director was able to find common ground for marketing all four physician groups without running afoul of the Stark regulations. Some of the tactics that were identified included:

  • Developing a formal physician/medical staff marketing issues action plan
  • Assigning managerial "go to" persons to each member of the medical staff to assure effective two-way communications and defuse rumors caused by inconsistent or no communication on issues of concern to physicians
  • Developing a physician leadership track
  • Sponsoring a speaker from a non-competitive market who could talk on issues such as reimbursement and customer service
  • Advertising from a "we're all in this together" approach, so that the employed physicians were not given any preference over the non-employed physicians.

As a result of implementing the above tactics, communications improved among all four groups. The health system also began to see a salutary effect on patient satisfaction scores.

A strategic framework
Within the context of the Stark regulations, marketers have three approaches to evaluate physician marketing opportunities. One is to take no chances and eliminate physician marketing altogether. A second is to let your general counsel review everything before going forward with anything.

Clearly, these first two options are not very realistic or advisable.

A third approach is to develop a strategic framework to evaluate all opportunities for hospital and physician relationship-building. Think in terms of physician relationship management, not in terms of what is OK or not OK under the Stark provisions. It's important to first understand the business proposition: Does this activity have mutual value to both parties? Then conduct the smell test: Could this activity be interpreted as an effort to favor or prefer specific physician practices over others in order to encourage an increase in patient referrals?

Figure 2 presents a decision algorithm for evaluating physician marketing opportunities.

The new Stark regulations require healthcare marketers to screen activities against a potential violation. However, this should not be what drives the decision-making process for determining whether to undertake an activity. Physician marketing efforts should be strategically sound for both parties, then evaluated for compliance.

Patrick T. Buckley is president and CEO of PB Healthcare Business Solutions LLC. He may be reached at 262-408-5549 or at
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