On June 9, 2015, the Department of Health and Human Services Office of Inspector General (OIG) issued a Fraud Alert focused on physician relationships. The Alert cautions physicians who enter into compensation arrangements such as medical directorships to ensure that those arrangements reflect fair market value (FMV) compensation for services the physicians actually provide.

The OIG noted that it recently reached settlements with 12 individual physicians who entered into questionable medical directorship and office staff arrangements. OIG alleged that the medical directorship arrangements ran afoul of the anti-kickback statute because the payments took into account the physicians’ volume or value of referrals, did not reflect fair market value for the services to be performed or because the physicians did not actually provide the services called for under the agreements. Some of the physicians also allegedly entered into arrangements under which an affiliated health care entity paid the salaries of the physicians’ front office staff. Because these arrangements relieved the physicians of a financial burden they otherwise would have incurred, the OIG found that the salaries paid under these arrangements constituted improper remuneration to the physicians. Unlike most government enforcement actions, however, the OIG focused on the culpability of the physicians as opposed to the hospital or other entity involved in the arrangements. The OIG determined that the physicians were an integral part of the scheme and brought administrative enforcement actions against the physicians under the Civil Monetary Penalty Law.

What are the takeaways from this Fraud Alert?

• Physicians and medical groups—in addition to hospitals and other providers—face real exposure to enforcement actions based on alleged violations of the anti-kickback statute and penalties that may arise from arrangements that exceed FMV.
• Medical directorships and other “smaller” arrangements sometimes do not receive the same level of focus from providers when it comes to establishing and documenting FMV. The Fraud Alert, which references medical directorships that led to civil money penalty settlements, provides confirmation that FMV requirements apply to all physician compensation arrangements.
• On occasion, physicians ask hospitals or other providers to furnish personnel, billing, or administrative support, or space, as part of a lease or other contractual arrangement.  Depending on the circumstances, furnishing or receiving that support or space, or similar items or services, free of charge or below FMV, could implicate the anti-kickback statute.
• If physicians are compensated for services it is prudent to ensure that he/she can demonstrate that the services were in fact performed.