OIG Again Cautions Providers (And Physicians) About Non-Compliant Physician Compensation Arrangements

Jackson Walker

On June 9, 2015, the Office of Inspector General ("OIG") of the Department of Health & Human Services issued a Fraud Alert reprising a familiar theme: ensuring that physician compensation arrangements comply with the Anti-kickback statute. The Alert noted that the OIG recently had reached settlements with 12 individual physicians who entered into "questionable medical directorship and office staff arrangements." In those cases, the OIG argued that the compensation paid to the physicians constituted improper remuneration under the Anti-kickback statute for several reasons: including that the payments took into account the physician's volume or value of referrals, and did not reflect fair market value for the services to be performed, and even that the physicians did not actually provide the services described under the agreements. The OIG also alleged that some of the physicians had entered into arrangements with an affiliated healthcare entity to pay the salaries of the physicians' front office staff, costs that the physicians otherwise would have incurred. The OIG determined that all of these elements violated the Anti-kickback statute and also subjected the physicians to liability under the Civil Monetary Penalties Law.

The Fraud Alert does not break new ground or tell providers anything they don't already know. It does evidence the OIG's willingness, however, to actually prosecute individual physicians who are part of a broader scheme that violates the Anti-kickback statute, and it is evidence of a new OIG emphasis to put compliance pressure on individuals as well as the organizations with which they contract. The Fraud Alert does not discuss liability under the Stark statute, the enforcement of which is delegated to CMS. But the issues identified by the OIG have almost equal application to that law.

The lesson both for providers and individual physicians is to make certain that any agreements with referring physicians are in writing and signed, that they accurately describe the services that the physicians will provide (with some underlying proof that those services really are needed), and that the parties have strong evidence—preferably an independent third-party valuation—of the fair market value of the services to be provided. In addition, there must be a mechanism to accurately report the time spent under those agreements and ensure that the services are delivered as required under the agreement. Finally, arrangements whereby a physician gratuitously is relieved of expenses or overhead that she ordinarily would pay is likely to draw scrutiny under the Anti-kickback statute.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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