ABC Hospital is one of two hospitals in the community. The Hospital offers all major specialty services (e.g. cardiology, neurology, pulmonology, etc.)

The Hospital is approached by a cardiologist who asks if the Hospital needs a medical director for its cardiology services. Generally speaking, a medical director is responsible for overseeing the delivery of services in a particular specialty or department. For example, a medical director might set schedules, develop standard processes and protocols, review cases to ensure that quality care was provided, and perform a host of other administrative functions.

The Hospital has medical directors in each of seven other specialties. The other medical directors have personal service contracts with the hospital pursuant to which each is paid $10,000 per year to serve as the medical director. Each medical director is required to spend 100 hours per year providing medical director services. The Hospital offers a contract to the cardiologist on these same terms.

The cardiologist rejects the offer. He says he will only serve as a medical director if he is paid $50,000 per year. He mentions that he is on the medical staffs of both hospitals in the community, and he mentions that he performs a lot of procedures at both hospitals, which generate a significant amount of revenue for the hospitals. He says he thinks $50,000 annually is more than reasonable under these circumstances, and he intends to approach the other hospital to see if they need a cardiology medical director if ABC hospital turns him down. He mentions that if the other hospital retains him, he likely would perform more procedures there, as it would be more convenient in light of the increased time he would be spending at the other hospital as its medical director.

You are the compliance officer at ABC Hospital. The Hospital's chief operating officer reaches out to you. She describes the above scenario to you. She says the Hospital has needed cardiology medical director for some time, and the lack of cardiology medical director has probably resulted in lower quality patient care and, on a few occasions, patient harm. Therefore, the hospital would like to contract with the cardiologist. She asks your advice on how to proceed.

Prepare memo to the Hospital's legal counsel. The memo should

1. Identify any Stark and/or Anti-Kickback issues presented by the scenario;
2. Explain your reasoning for why these may be issues;
3. Ask counsel to answer specific questions about the scenario.