In the Wild West days of the 1980s and 90s, it wasn’t uncommon to see as many medical directors receiving stipends from a hospital as there are aspirins in a Costco-size bottle.
There were medical directors of this and medical directors of that. All designed, of course, to cement or bond or align (which, in 1990, was a word chiefly applied to automobile wheels) physicians who directly or indirectly referred significant numbers of patients to the hospital.
Sure, lots of those arrangements were legal. But lots weren’t.
Due largely to enforcement actions under criminal (the federal anti-kickback statute and state counterparts) and civil (the federal, i.e. Stark, and state prohibitions on self-referral) regulatory regimes, the occurrence of softball, fluff, and close-to-or-actually-completely-BS medical directorships waned considerably over the ensuing years.
But they didn’t go away.
Consider the warning shot fired by the Office of Inspector General of the U.S. Department of Health and Human Services (the “OIG”) in its June 2015 Fraud Alert: Physician Compensation Arrangements May Result in Significant Liability.
In the Fraud Alert, the OIG warned that physicians entering into medical directorships must ensure that they involve fair market value for bona fide services that the physicians actually provide. The OIG warned that a compensation 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.
The Fraud Alert cited the OIG’s settlements with 12 individual physicians who were alleged to have received improper medical director compensation. The OIG alleged that the compensation violated the anti-kickback statute for a number of reasons, including that the payments took into account the physicians’ volume or value of referrals and did not reflect fair market value for the services to be performed, and because the physicians did not actually provide the services called for under the agreements.
Today, and tomorrow, as more and more surgical procedures leave the hospital setting for ASCs and other outpatient facilities, query whether hospital administrators will revisit medical directorships with renewed fervor as they seek ties that bind.
Certainly, many medical directorships can be structured to be in compliance with applicable law and regulation. Others are simply attractive traps: they are ties that bind.
Among the many factors that physicians must consider when vetting and negotiating medical directorships are: (1) the demonstrable establishment of fair market value; (2) the actual, provable, and documented performance of duties; and (3) the relevance of duties (e.g., tasks and responsibilities that are not duplicative of hospital administrative staff roles).
Of course, for maximum assurance, directorship deals should comply with the relevant federal anti-kickback statute safe harbor. And, if the physician is in a position to refer for designated health services under Stark, the deal must fit within one of that law’s mandatory safe harbors.
