The Business of Healthcare

OIG Issues Fraud Alert on Physician Compensation

June 15, 2015

The federal Anti-Kickback Statute (the “AKS”) makes it a crime to pay remuneration to induce a referral of a federal health care program patient.

Many are familiar with the safe harbors, the exceptions, for physician employment agreements and for personal services contracts. But many mistakenly believe that simply following the “recipe” set out in those safe harbors is sufficient. It’s not.

From time to time, the Office of Inspector General of the U.S. Department of Health & Human Services (the “OIG”), the agency charged with enforcing the AKS, issues Fraud Alerts to warn providers of commonly seen compliance lapses. The most recent Fraud Alert, released earlier this month, aims directly at physician compensation arrangements.

The Fraud Alert grew out of a recent spate of OIG settlements with physicians concerning alleged illegal compensation arrangements, including medical directorships.

The OIG reminded in the Fraud Alert that compensation must be at fair market value for bona fide services the physician actually provides. The arrangement can’t take into account the volume or value of referrals.

The OIG also restated its long held position that an otherwise legitimate compensation arrangement may violate the AKS if even one purpose is to violate the AKS, that is to compensate for past or future referrals. In other words, fitting completely into the safe harbor might not be sufficient to protect you.

The OIG also mentioned a less obvious, but very common violation: The instance in which the referral recipient or an affiliate pays expenses which are actually those of the referring physician or medical group. The cited example was payment for the physician’s front office staff. Relief from overhead is equivalent to a payment of like amount.

Be extremely careful when entering into any physician compensation arrangement, whether you are the payor or the recipient.

Penalties for violation of the AKS include jail time, criminal fines, civil monetary penalties and debarment from participation in federally funded health care programs.

What passes as common knowledge in this area does not come close to comprehending the complexity of AKS compliance.

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