Money talks, and for hospitals and physicians this can become a real problem when negotiating a fair-market-value compensation arrangement. Hospitals and physicians negotiating compensation arrangements may have more people “listening into” their discussions than they may want or even realize. The federal case of United States of America ex rel. Michael K. Drakeford, M.D. v. Tuomey d/b/a Tuomey Healthcare System, C.A. No. 3:05-CV-2858-MJP, provides hospitals and physicians with insight into how the government views compensation under employment contracts. So, how do you keep yourself out of the trouble when negotiating and accepting a physician employment agreement?

In Tuomey, a physician, Dr. Drakeford, brought a federal lawsuit alleging that Tuomey’s referrals from employed part-time physicians violated several federal statutes, from the False Claims Act to the Stark law, because of the allegedly excessive compensation offered by the hospital to referring physicians that polluted claims submitted by the hospital for reimbursement from Medicare and Medicaid. Dr. Drakeford owned the only orthopedic clinic in Sumter County when the hospital offered him a part-time employment agreement. Dr. Drakeford sought legal counsel over the propriety of the proposed arrangement (who expressed compliance concerns), who in turn with hospital counsel engaged an attorney who had formerly worked on issuing formal guidance to providers through fraud alerts and advisory opinions. The former government attorney discussed the proposed arrangement with attorneys for the hospital and for Dr. Drakeford and expressed concerns about the compensation and the valuation opinion received by the hospital.