Co-branded marketing between hospitals and independent practices: Stark, anti-kickback and HIPAA

A hospital offers to put your practice on its billboards. A health system proposes a joint campaign for a new service line, with your physicians in the ads and its logo next to yours. A recruiter mentions that the hospital will cover the cost of announcing your new associate. Each offer looks like free marketing. Under federal fraud and abuse law, marketing that a hospital pays for and a referring physician benefits from is something of value moving from the party that bills for referrals to the party that makes them.

This guide covers marketing arrangements between hospitals and independent physician practices: who pays, what has to be in writing, and what to check before your name and the hospital’s share an ad. Gifts, meals and holiday items for referring physicians are covered in our guide to gifts and meals for referring physicians, sponsoring teams and events in our guide to healthcare sponsorships and naming rights, partnerships with community groups in our church and community partnerships guide, and the words you may use to describe a hospital relationship in our guide to hospital affiliation claims.

The short version

• The Stark law bars a physician from referring Medicare patients for designated health services, which include inpatient and outpatient hospital services, to an entity the physician has a financial relationship with, unless an exception applies (42 USC 1395nn(a)(1), (h)(6)).
• Remuneration under Stark includes any remuneration, directly or indirectly, overtly or covertly, in cash or in kind (42 USC 1395nn(h)(1)(B)). Advertising a hospital pays for and your practice benefits from is in kind.
• We found no Stark exception and no anti-kickback safe harbor written for a hospital paying for a physician practice’s advertising.
• OIG guidance says arrangements in which hospitals give physicians items or services for free or below fair market value, or relieve them of financial obligations they would otherwise incur, pose significant risk (70 Fed. Reg. 4858).
• The cleaner structure is a written agreement in which each party pays fair market value for what it gets, set in advance and not tied to referrals.
• Sharing patient lists for a joint campaign is a disclosure for marketing under HIPAA and needs patient authorization, with narrow exceptions (45 CFR 164.501, 164.508(a)(3)).

Why marketing support counts as remuneration

The Stark law applies when a physician, or an immediate family member, has a financial relationship with an entity that furnishes designated health services. Unless an exception applies, the physician may not refer Medicare patients to that entity for those services, and the entity may not bill for them (42 USC 1395nn(a)(1)). Inpatient and outpatient hospital services are on the statute’s list of designated health services (42 USC 1395nn(h)(6)). A compensation arrangement is any arrangement involving remuneration between the physician and the entity, and remuneration includes payments and benefits in kind (42 USC 1395nn(h)(1)(A), (B); 42 CFR 411.351).

A billboard, a radio spot or a paid search campaign that promotes your practice has a market price. If the hospital pays that price, your practice receives something it would otherwise buy. OIG’s hospital guidance names this pattern: it says arrangements in which hospitals provide physicians with items or services for free or below fair market value, or relieve physicians of financial obligations they would otherwise incur, pose significant risk, and that an inference arises that the remuneration may be in exchange for generating business.

The anti-kickback statute adds a second layer. It makes it a felony to knowingly and willfully offer or pay remuneration, in cash or in kind, to induce referrals of items or services payable by a federal health care program, and to solicit or receive it in return for referrals (42 USC 1320a-7b(b)(1), (2)). OIG’s hospital guidance says neither a legitimate business purpose nor a fair market value payment will legitimize a payment if there is also an illegal purpose of inducing federal health care program business. The penalties under both laws are covered in our guide to patient and physician referrals.

Stark exceptions to check

A Stark compensation arrangement has to fit an exception in full. OIG’s hospital guidance says a hospital should ensure that each compensation arrangement with a referring physician fits squarely in an exception. These are the exceptions in 42 CFR 411.357 that come up in marketing arrangements, and where they stop.

• Fair market value compensation (411.357(l)). Covers items or services an entity provides to a physician, or a physician provides to an entity, when the arrangement is in writing, signed, specifies the items or services, the compensation and the timeframe, the compensation is set in advance, consistent with fair market value and not determined by referrals, and the arrangement would be commercially reasonable even if no referrals were made. In a joint campaign, this is the exception the practice paying its share fits.
• Payments by a physician (411.357(i)). Covers payments by a physician to an entity for items or services furnished at a price consistent with fair market value, but only where the exceptions in paragraphs (a) through (h) of 411.357 do not apply.
• Nonmonetary compensation (411.357(k)). Covers items or services, not cash or cash equivalents, up to a yearly limit per physician that CMS adjusts for inflation. The compensation may not be determined by referrals and may not be solicited by the physician or the practice. One campaign can exceed the limit, and anything else the hospital gives the same physician that year counts toward it. Our gifts and meals guide covers the limit.
• Personal service arrangements (411.357(d)). Covers payments from an entity to a physician for services the physician provides, under a signed writing that specifies the services, with compensation set in advance and consistent with fair market value. If the hospital pays a physician to appear in its ads or speak for a service line, this is the type of exception to look at.
• Limited remuneration to a physician (411.357(z)). Covers payments from an entity to a physician for items or services the physician provides, up to a yearly limit adjusted for inflation, at fair market value and not determined by referrals. It runs from the hospital to the physician for the physician’s services, so it does not cover the hospital paying for the practice’s ads.
• Physician recruitment (411.357(e)). Covers payments a hospital makes to recruit a physician to relocate to its service area. When the physician joins an existing practice, all remuneration except the actual costs the practice incurs in recruiting the new physician has to pass directly through to or remain with the recruited physician (411.357(e)(4)(ii)).

The rule text does not say whether advertising the recruited physician to patients counts as an actual cost of recruiting. OIG’s hospital guidance warns that joint recruiting arrangements can be used to disguise payments to an existing practice in exchange for its referrals, and says hospitals should make sure remuneration does not benefit any party other than the recruited physician. We recommend that any announcement campaign paid with recruitment money be named in the recruitment agreement and reviewed by counsel before it runs.

Anti-kickback safe harbors

The anti-kickback safe harbors are in 42 CFR 1001.952. OIG’s hospital guidance says safe harbor protection requires strict compliance with all applicable conditions, that failing to fit a safe harbor does not mean an arrangement is illegal per se, and that arrangements outside a safe harbor are evaluated case by case. We read the safe harbor regulation and did not find one for a hospital paying for a practice’s marketing. Two come up in these arrangements.

• Personal services and management contracts (1001.952(d)(1)). Protects payments by a principal to an agent for the agent’s services when the agreement is in writing and signed, covers all the services for its term, runs at least 1 year, sets the compensation methodology in advance at fair market value without regard to referrals, and the services do not exceed what is reasonably necessary for a commercially reasonable business purpose.
• Referral services (1001.952(f)). Protects a referral service, such as a hospital’s find-a-doctor line, when it does not exclude anyone who meets its qualifications, charges participants equally and only to cover the cost of running the service, imposes no requirements on how participants treat referred patients beyond the ones the rule allows, and makes five written disclosures to each person seeking a referral, including how participants are selected and whether the participant paid a fee. The Stark exception for referral services points to the same standards (42 CFR 411.357(q)).

A hospital that lists only the independent physicians who send it the largest number of patients in its directory, or features them in its ads, is choosing participants by referral volume. That is the opposite of the referral services standards. If your practice is offered a featured placement, ask how the hospital selects who is featured and whether the selection is written down.

Joint campaigns where each side pays its share

A co-branded campaign can promote both parties at once: a hospital’s new imaging center and the orthopedic practice next door, or a hospital’s heart program and the independent cardiologists on its staff. No federal rule sets a formula for splitting the cost. We recommend a written agreement, signed before anything runs, that does the following.

• Lists each item in the campaign: placements, design, production, landing pages and the period.
• States what each party pays and how the split was set, such as share of ad space or screen time, with the fair market value support kept on file.
• Says payment is not conditioned on referrals and does not change with the number of patients either party sends the other.
• Says who owns the creative, who approves each version and who may reuse it after the campaign.
• Covers how the hospital’s name and logo may be used and what happens to them when the agreement ends.
• Says whether any patient information will be used, and if so, under what HIPAA authorization.

The 411.357(l) exception also requires that the arrangement be commercially reasonable even if no referrals were made between the parties. CMS defines commercially reasonable as an arrangement that furthers a legitimate business purpose of the parties and is sensible given their size, type, scope and specialty (42 CFR 411.351). A campaign whose main value to the hospital is your practice’s referrals does not meet that test.

Physicians in the hospital’s ads

When a hospital wants your physicians in its own ads, the direction of value reverses: the hospital receives a service, the physician’s time and name, and may pay for it. The payment has to fit an exception such as 411.357(d) or 411.357(l), at fair market value and not tied to referrals. Payment far above market for a short appearance, or appearances offered only to high-volume referrers, is what OIG’s guidance describes as inflated compensation.

If a physician recommends the hospital in the ad, the FTC treats that as an endorsement. A material connection between the endorser and the advertiser that the audience would not expect has to be disclosed clearly and conspicuously (16 CFR 255.5(a)). A paid appearance or a significant referral relationship can be that kind of connection. Our guide to spokesperson endorsements in practice ads covers disclosure wording.

Patient lists and joint mailings

A joint campaign can tempt both sides to pool their patient lists for a mailing or a custom audience. HIPAA defines marketing as a communication about a product or service that encourages the recipient to purchase or use it, with exceptions for treatment and certain health care operations communications that do not apply when the covered entity receives financial remuneration in exchange for making the communication (45 CFR 164.501). A covered entity needs patient authorization for any use or disclosure of protected health information for marketing, except a face-to-face communication or a promotional gift of nominal value (45 CFR 164.508(a)(3)).

A practice handing its patient list to a hospital so the hospital can advertise its own services to those patients is a disclosure of protected health information for marketing. We recommend that each party market to its own patients under its own HIPAA analysis, and that the agreement says no patient information moves between the parties for the campaign. Our guide to HIPAA marketing rules covers the authorization in more detail.

The hospital’s name and logo

Putting a hospital’s logo on your ads says something about your relationship with it. The Lanham Act lets a party sue over a use of a name or symbol that is likely to cause confusion about affiliation, connection or sponsorship (15 USC 1125(a)(1)(A)). Get written permission that names the logo, the uses and the period, and stop using it when the permission ends. The words that may describe the relationship, such as “affiliated with” or “in partnership with”, are covered in our guide to hospital affiliation claims. A franchise brand licensing its name to independent clinics raises related questions, covered in our guide to healthcare franchise marketing rules.

Asking for an advisory opinion

CMS issues advisory opinions on whether a physician’s referral is prohibited under the Stark law, on request from any individual or entity (42 CFR 411.370). OIG issues advisory opinions on the anti-kickback statute and its other fraud and abuse authorities under 42 CFR part 1008, and its hospital guidance says these opinions are issued to specific parties about their own arrangements. Our sponsorships guide covers how far an advisory opinion issued to someone else can be relied on. For an arrangement with real money involved and no exception that fits, your attorney may recommend asking for one.

Questions to ask before you say yes

• Who pays for each part of the campaign, and what would that part cost on the open market?
• Is the hospital paying for anything your practice would otherwise pay for itself?
• Which Stark exception does the arrangement fit, and does it meet each condition of that exception?
• Is the agreement in writing and signed before the first ad runs?
• Does anything in the offer depend on the number of patients you send to the hospital?
• Was the offer made to physicians chosen by referral volume?
• Will any patient information move between the hospital and the practice?
• Do you have written permission for the hospital’s name and logo, with an end date?
• If a physician appears in the hospital’s ads, is the pay at fair market value and is the connection disclosed?

Use and avoid

• Use: A signed agreement in which each party pays its own share of a joint campaign at fair market value.
• Avoid: A hospital paying for your practice’s billboard or search ads because your physicians are on its staff.
• Use: A find-a-doctor listing open to each physician who meets written qualifications.
• Avoid: Featured placement offered only to the practices with the highest referral volume.
• Use: Each party marketing to its own patients under its own HIPAA analysis.
• Avoid: Pooling patient lists for a joint mailing without authorization.
• Use: Written permission for the hospital’s logo with uses and an end date.
• Avoid: Keeping the hospital’s logo on your site after the agreement ends.

An illustration

This example is invented. A regional hospital opens an outpatient joint replacement program and offers [Practice name], an independent orthopedic group on its medical staff, a six-month co-branded campaign: billboards, radio and paid search showing the group’s surgeons and both logos. The first draft says the hospital will cover all costs.

The group’s attorney points out that the group would receive advertising it would otherwise pay for, from an entity it refers patients to, and that no exception covers a gift of that size. The parties rework it. An outside media buyer values the campaign by placement, and the agreement splits the cost by the share of each ad given to each party. The group pays its share up front. The agreement says payment does not depend on referrals, names the logo uses and their end date, and says no patient lists will be shared. The surgeons who appear in the hospital’s separate radio spots are paid an hourly rate set by a valuation firm, and the spots say they are on the hospital’s medical staff and paid for their time.

Checklist

• List each marketing benefit the hospital offers your practice, with its market value.
• Name the Stark exception and the anti-kickback safe harbor, if any, that each arrangement relies on.
• Put the arrangement in a signed writing before any ad runs, with the items, the price, the period and who pays what.
• Keep the fair market value support on file for each payment in each direction.
• Make sure no term depends on referrals and the offer was not limited to high-volume referrers.
• Count any in-kind items toward the nonmonetary compensation limit for each physician.
• Keep patient information out of the campaign unless each patient has signed a HIPAA authorization.
• Get written logo permission with an end date, and take the logo down when it ends.
• Disclose paid or material connections when a physician recommends the hospital in an ad.
• Have a health care attorney review the agreement before signing.

How we help

We build websites, local and organic search, Google Ads and lead generation and an AI front desk for independent practices. For co-branded marketing with a hospital, that means a campaign plan that lists each placement and its cost so your attorney can see who pays for what, and creative that shows only the logos and relationship wording you have permission for. Our tools are built with HIPAA in mind. We confirm in writing what a BAA covers before any patient information flows through a tool, and if it is not covered, we do not route patient information through it. We are not a healthcare provider and we do not give legal or medical advice. For the wider rules, see our healthcare marketing rules guide.

Sources

• 42 USC 1395nn: Limitation on certain physician referrals (Stark law)
• 42 CFR 411.351: Definitions (physician self-referral)
• 42 CFR 411.357: Exceptions to the referral prohibition related to compensation arrangements
• 42 CFR 411.370: Advisory opinions relating to physician referrals
• 42 USC 1320a-7b: Criminal penalties for acts involving Federal health care programs (anti-kickback statute)
• 42 CFR 1001.952: Exceptions (anti-kickback safe harbors)
• OIG Supplemental Compliance Program Guidance for Hospitals, 70 Fed. Reg. 4858 (January 31, 2005)
• OIG: Compliance guidance (list of current and archived guidance)
• 45 CFR 164.501: Definitions (marketing)
• 45 CFR 164.508: Uses and disclosures for which an authorization is required
• 16 CFR 255.5: Disclosure of material connections
• 15 USC 1125: False designations of origin, false descriptions, and dilution forbidden (Lanham Act)

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