Hospitals are now requiring physicians to submit timesheets before they can get paid. In the typical scenario, the hospital is paying the physician to provide x number of hours of medical director/on-call/administrative/supervisory/teaching services per month and is paying the physician x dollars per hour. The rate is based on compensation surveys and falls somewhere between the 50th and 75th percentile for the physician’s specialty and geographic region where the hospital is located. As long as the physician puts in the required number of hours doing meaningful work, there is little question that the total compensation paid will be at fair market value.

So what happens if the physician fails to document the required number of hours? Has the hospital violated the Stark law by paying the physician more than fair market value for the services? Perhaps, but not necessarily. If the physician is putting in the time, but is not documenting it, then there is no violation. The physician may be in breach of the contract, but not Stark.

If the physician is not putting in the required time, then the hospital may have a problem. Arguably, if the rate paid for the hours actually worked by the physician is still within the range of fair market value, then there is no Stark violation. A regulator could conclude, however, that the hospital paid more than fair market value for the services that were provided because the rate paid was higher than what was called for in the contract.

What if the physician documents more hours than are required by the contract? Fair market value is not an issue because the rate paid will be lower than the asserted fair market value rate. Beware though as the physician could use the requirement to provide timesheets as the basis for requesting additional compensation during the contract negotiations for the renewal contract. The contract should also address whether the physician can do the work in uneven blocks of time — 10 hours one month, 30 hours the next — or has to do the same number of hours each month. The more flexibility the better, although it has to make sense given the purpose of the arrangement.