Fam Pract Manag. 1999 Nov-Dec;6(10):49.

Compensation plans, the IRS and Stark laws


I am one of several employed physicians at my institution. Our institution plans to put all physicians on salary, based strictly on gross revenue the first year and net revenue the next year. Our benefits have been cut to just health insurance and a CME stipend — eliminating paid vacation. The institution claims that the IRS and Stark laws are forcing us into this mode of compensation. Are these changes an accurate reflection of the IRS and Stark laws, and how can I obtain a copy of the Stark laws?


It's not immediately clear to me that your institution's actions are an accurate reflection of the IRS or Stark laws. If the institution is basing its decision on those laws, then it or its legal counsel should be able to cite exactly which section of the laws it is attempting to comply with. At a minimum, seek this clarification from your institution.

The IRS and Stark laws, and the resulting regulations, are immensely complicated. The substance of the Stark laws can be found in Section 1877 of the Social Security Act (42 U.S.C. 1395nn), and regulations related to the Stark laws were published in the Federal Register on Aug. 14, 1995, and Jan. 9, 1998. You can access the Federal Register online at

If you think the financial impact of this situation is significant enough, you and your colleagues may want to hire a health care consultant or attorney who is knowledgeable in this area and who can advise you on the particulars of your situation. One resource for finding such a consultant or attorney is FP Assist, a service of the AAFP. You can access this service online at or by calling 800-274-2237, ext. 4172.

The physician-patient relationship


At what point is the physician-patient relationship officially established? Patients often select me as their primary care provider, but I may not meet them for several months. If a new patient comes in for a “get-acquainted” visit and I do not feel I can handle that person as a patient, can I choose not to be that person's physician?


It's important to remember that the law on this varies from state to state, and each situation must be judged by its own facts and circumstances.

However, the key question to ask to determine whether you are responsible for a particular patient is, “Does the patient reasonably believe you will provide necessary medical care to him or her?” The physician-patient relationship is clearly established when you conduct the initial history and physical. However, depending on state laws, the relationship may exist the moment that first appointment is made.

Generally, the fact that a patient is enrolled in a managed care plan that you contract with does not establish the physician-patient relationship. But once the patient designates you as his or her primary care provider, or once you begin receiving a capitation payment for that patient, the physician-patient relationship may have been established even though you have not conducted an initial office visit or history and physical.

The question of whether you can choose not to accept a patient after a get-acquainted visit depends on whether you have indeed established a physician-patient relationship, either in the eyes of the law or in the eyes of your patient. If a relationship has not been established and you choose not to accept the patient, you should confirm with the patient, in writing, that no physician-patient relationship was established and that you do not accept any obligation to provide diagnoses or treatment based on the get-acquainted visit or as a follow-up to it.

The contract you have with the patient's health plan does not govern the physician-patient relationship, but it may deal with issues of accepting new patients and impose other restrictions. Review each contract individually.

Transcribing encounter notes


At my practice, management isn't willing to pay for transcription of encounter notes. From the perspective of liability risk management, wouldn't it be to the practice's advantage to have our notes transcribed?


Transcription of encounter notes, by itself, does not meet any particular risk-management function.

If a physician's handwriting is illegible, or if he or she is more effective at dictating than writing, transcribed notes can be useful. On the other hand, transcribing progress notes can cause liability problems if the notes are not entered into the patient's record in a timely fashion, thus compromising continuity of care. Late dictation can distort the records rather than enhance them.

*Denotes member of FP Assist, the AAFP's online clearinghouse for consultants and attorneys.


Copyright © 1999 by the American Academy of Family Physicians.
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