On June 9, 2015, the HHS Office of Inspector General (OIG) issued a Fraud Alert that cautions physicians about questionable medical directorship and office staff arrangements. [Alert available here]. In the Fraud Alert, the OIG warns that a physician can potentially be held liable under the Anti-Kickback Statute if he/she accepts payments for medical director services that he/she does not furnish. The OIG appears to have issued this Fraud Alert because it recently reached settlements with twelve individual physicians who entered into medical directorship arrangements with an MRI company, and accepted payments based upon the value and volume of their referrals (including also payment by the MRI company for some of the physicians’ office staff). In the Fraud Alert, the OIG stresses that it has the ability to bring cases using the so-called “one purpose” test – that an “arrangement may violate the Anti-Kickback Statute if even one purpose of the arrangement is to compensate a physician for his or her past or future referrals of Federal health care program business.”

Previous OIG Settlements

This Fraud Alert comes on the heels of the OIG’s recent settlements flowing from allegations against a Houston MRI center called Fairmont Diagnostic Center and Open MRI, Inc. In 2012, Fairmont Diagnostic Center paid $650,000 to settle a qui tam action alleging the payment of kickbacks to medical directors. [Additional details here]. At that time, the owner, a radiologist, agreed to be excluded for a period of six years. The OIG subsequently investigated the medical directors, and – in 2013 and 2014 – the OIG reached Civil Monetary Penalties (CMP) settlements with twelve physicians who allegedly received medical directorship payments from Fairmont Diagnostic Center. The settlements ranged from $50,000 to $195,016, with the common allegation that the medical director payments took into account the value and volume of referrals made to Fairmont Diagnostic Center, and that the physicians did not provide actual medical director services.

In recent years, the OIG has increased its rhetoric about pursuing individuals who violate Federal fraud and abuse laws. It is noteworthy both that the OIG pursued individual physicians, but also that the OIG took the extra step to publicize its prosecution of physicians in a Fraud Alert. Clearly the OIG is trying to emphasize to the health care community that it will pursue the physicians who participate in alleged kickback schemes.  

Risk Reduction is Possible

The Fraud Alert serves as a reminder to health care providers of the risks related to provider-physician contracting. Prudent health care providers (including physicians) can minimize such risks by ensuring that all medical director, or other physician compensation arrangements, conform to standards that meet Federal requirements. This typically includes:

• confirming and documenting (at a minimum) that arrangements reflect fair market value for services rendered;
• payments do not take into account the physician’s referrals; and
• the agreed upon services are actually performed by the physician.