Earlier this month, OIG issued Advisory Opinion 23-07, a favorable opinion regarding an employer’s proposal to pay bonuses to its employed physicians based on net profits derived from certain procedures performed by the physicians (the Advisory Opinion). As discussed in further detail below, OIG found that although the proposed bonus compensation arrangement would implicate the federal Anti-Kickback Statute (AKS), the proposed arrangement would be protected by the statutory exception and regulatory safe harbor for bona fide employees.

The Request

The Advisory Opinion was requested by a multi-specialty physician practice (the Requestor) that has approximately eleven physician employees (the Physician Employees), all of whom the Requestor certified are bona fide employees. Under the proposed arrangement, the Requestor proposes to implement an employment compensation bonus methodology for each of the Physician Employees, in addition to their base employment compensation, which would be in exchange for the services they provide on behalf of the Requestor, including services for which payment may be made under federal healthcare programs. Specifically, when a Physician Employee performs outpatient surgical procedures at either of two ambulatory surgical centers (ASCs) operated by Requestor in a given calendar quarter, the Physician Employee would receive a bonus equal to thirty percent of Requestor’s net profits from the ASC facility fee collections attributable to that physician’s procedures performed at the ASC for that quarter.

OIG’s Advisory Opinion

In the Advisory Opinion, OIG explained that when the relevant ASC procedures are referred by the Physician Employee and are reimbursable by federal healthcare programs, the AKS would be implicated. However, OIG ultimately concluded that the bonus compensation would be protected by the statutory exception and regulatory safe harbor for bona fide employees because:

• the Requestor certified that the Physician Employees would be bona fide employees of Requestor in accordance with the definition of that term set forth at 26 U.S.C. § 3121(d)(2); and
• the bonus compensation would constitute an amount paid by an employer to an employee for employment in the furnishing of any item or service for which payment may be made in whole or in part under Medicare, Medicaid, or other federal healthcare programs.

The Advisory Opinion notes that a similar arrangement involving bonus payments to independent contractor physicians or other nonemployees or under a different corporate structure may raise fraud and abuse concerns under the AKS. Indeed, the Fourth Circuit Court of Appeals has already twice held that commission-based compensation arrangements with independent contractors cannot be safe harbored and do violate the AKS and the federal False Claims Act (FCA). See, e.g., United States ex rel. Nicholson v. MedCom Carolinas, Inc., 42 F.4th 185 (4th Cir. 2022); and United States v. Mallory, 988 F.3d 730 (4th Cir.), cert. denied sub nom. Dent v. United States, 142 S. Ct. 485 (2021).

Advisory Opinion 23-07 is limited in scope to the proposed arrangement and cannot be relied upon by anyone other than the Requestor. However, the Advisory Opinion provides a helpful indication of how OIG might respond to similar requests. A copy of the Advisory Opinion is available here.