• Physician Compensation Arrangements Still a Priority for Federal Enforcement
  • October 22, 2015 | Author: Sigrid Cheryl Haines
  • Law Firm: Lerch, Early & Brewer, Chartered - Bethesda Office
  • In 1972, Congress passed the federal antikickback law, making it a federal felony to pay, or receive payment, for the referral of federal health care program business, including Medicare- and Medicaid-covered services. The law is broadly drafted, and concerns arose that it might discourage legitimate business arrangements. Thus, in 1991, the federal Office of Inspector General (OIG) started to issue regulatory “safe harbors” and other guidance to advise the health care community of its views. The evolving series of regulations to implement the federal physician self-referral law (known colloquially as the “Stark” law) contain similar guidance regarding physician contracting.

    Using this guidance, it usually is possible to discern which business arrangements between referring providers are considered to be legitimate by the enforcing federal agencies. An arrangement should be in writing, setting forth all the terms and conditions of the arrangement and signed by the parties. If the arrangement is for parttime services, the agreement must state the precise schedule and length and the exact charge for the services. The contract term must be for at least a year (or, if terminated earlier, the parties are prohibited from renewing their relationship during the first year of the original term). Compensation must be set in advance, be consistent with fair market value in an arm’s-length transaction, and not be calculated in a fashion that takes into account the volume or value of referrals between the parties. The arrangement must be commercially reasonable and not otherwise illegal. If there are multiple agreements between the parties, they must be referenced in a master list available for audit. The federal auditors require timesheets to document the services being performed for the payment received.

    Fraud Alert Encourages Careful Consideration of Compensation Arrangements


    Although this OIG guidance has existed for over 20 years, significant enforcement actions continue. On June 9, 2015, the OIG issued a Fraud Alert that reminded the health care community of its views. The Fraud Alert restated the OIG’s position that compensation arrangements must be legitimate and that a violation can be found if even one purpose of the arrangement is to compensate a provider for its past or future referrals of federal health care program business. The OIG encouraged physicians to consider the terms of medical directorships and other compensation arrangements carefully before entering into them.

    The Fraud Alert stated that the OIG recently reached settlements with 12 individual physicians who had entered into questionable compensation arrangements. The OIG alleged that payments constituted improper remuneration under the anti-kickback laws, including the fact that the compensation took into account the volume or value of referrals, the payments did not reflect fair market value for the services provided, and/or the compensated services were not actually provided. Included amongst the alleged violations were situations where an affiliated health care entity paid expenses for which the physicians would otherwise be responsible, such as the salaries of the physicians’ office staff.

    The OIG currently is hiring more enforcement staff. There has never been a greater need for well-drafted contracts that comply with all sources of federal guidance.