One of the hallmarks of physician recruitment contracts offered by hospitals and physician groups is the incentive of "foregiveness" of "loans" offered t phy;sicians who are financially underwritten as an inducement to relocate and entier profesioal practice ina particular location. Typically, there is a subidiy of the practice for a few years followdd by a three year or so period of continuing practice ofbligaiton in the community, during which the origional subsidy "loan" is written of over time and the physician is given Form 1099C (cancellation of dept) in the later years of the guarantee arrangement.
Last April, a United States District Court judge in the State of Washington, agreed with the Internal Revenue Service that those kinds of "loans" were in fact compensation and not loans at all. It held that the physician group was liable for failure to withhold from the payments to its physicians. The case was The Vancouver Clinic, Inc. v. The United States of America, 111 AFTR 2d paragraph 2031-632 (2013 DC Wash.).
The Hon. Rondal B. Leighton entered summary judgment in favor of the IRS,holding that because both the group and the physician at the inception had no expectatoin that the incentives would be repaid and that there would never be a repayment of the "loan", it was not in fact a loan.
These kind of incentive arrangments will in the future likely to be designed to have the look and feel of actual loans with effective promissory notes and periodic payments over the term of the loan agreements, including the early years. This is just aother level of complexity in the three dimensional chess game of the multiagency oversight regulation of health care systems.