The United States regulates the business of healthcare more strictly than nearly any other sector, and the issue of employment in healthcare is no exception. There are laws that govern the ability for a healthcare business to employ every type of worker, from a healthcare provider, administrator, management company, to virtually any person or entity that provides services of any kind. Employment in healthcare is not as simple as the typical assessment, 1099 or W-2. The ability to enter either depends on numerous factors: What type of services relationship? What type of financial arrangement is being proposed? What type of insurance is being accepted? Is this engagement a marketing arrangement? The considerations behind legally compliant employment arrangement are vast in healthcare and require deep attention to the underlying facts and less attention to what the parties intend.

As such, there is no employment contract template or 1099 agreement when it comes to healthcare business. Every agreement must be customized to a specific scenario in addition to specific services, among many other issues.

For the most part, healthcare laws can be most agreeable when arrangements are based off of a W-2 “bona fide employee” relationship. The Federal Anti-Kickback Statute (AKS), the Federal Physician Self-Referral Act (Stark), Florida’s Patient Brokering Act (PBA), Florida’s Patient Self-Referral Act of 1992 (PSRA), and Florida’s case law on “Fee Splitting” are just some of the basic overarching laws that govern financial relationships in healthcare. And the safe harbors and exceptions under these laws have the most favorable and lowest risk from the regulators’ perspective under the W-2 arrangement. Taking then into account the requirements under the Department of Labor’s (DOL) recent changes to what qualifies as a W-2 employee versus 1099, is another overlay of analysis that must be considered when determining the proper arrangement.

While 1099 is typically the “easier” choice in certain corporate environments, it is a riskier choice in healthcare, and increasingly in the cash pay wellness sector of healthcare. The 1099 independent contractor relationship carries both a heightened risk and an enhanced level of scrutiny from a healthcare legal perspective, as well as from DOL enforcement. Wellness businesses such as medspa, IV hydration clinics, and telemedicine concierge practices are entering the healthcare continuum without addressing the resultant laws that must be complied with. Cash pay businesses in healthcare paying providers or employees on a 1099 basis are especially at risk from a PBA perspective and subject to scrutiny based on Fee Splitting laws in Florida. Waiting until something goes wrong, whether a monetary dispute or medical negligence / malpractice allegation, is a recipe for disaster. Not only will business owners have to deal with the catalyzing event, but the fallout associated with violating the relevant laws on a contractual level can range from fines to civil and monetary penalties and even criminal charges.

It is essential to work with a qualified healthcare attorney before crafting employment arrangements of any kind, to ensure anything prepared by a business law or contract law specialist has the appropriate considerations relevant to healthcare laws and regulations. Resolve to review, rewrite, or reconsider now! 2024 is the year of opportunity.