United States: OIG Fraud Alert Regarding Physician Compensation Arrangements: What You Need To Know

On June 9, 2015, the Department of Health and Human Services' Office of the Inspector General ("OIG") issued a new fraud alert regarding physician compensation arrangements, with a particular emphasis on medical director arrangements. The OIG urged physicians to "carefully consider the terms and conditions of medical directorships and other compensation arrangements before entering into them," so as to avoid violation of the Anti-Kickback statute.

This Fraud Alert serves as a reminder to physicians that prior to entering into compensation arrangements, they should verify that the payments reflect fair market value for the services provided and are not calculated based on the volume or value of the physician's referrals of patients covered by a federal healthcare program or other business generated between the parties. This latest fraud alert mentions medical directorships in particular because of the concern that schemes exist to compensate referring physicians improperly through positions that require few actual duties. However, medical directorships are just one type of physician compensation arrangement that could violate the Anti-Kickback statute.

The Anti-Kickback statute is both a civil and criminal statute that prohibits the exchange (or offer to exchange) of anything of value to induce or reward the referral of patients participating in a federal healthcare program. The statute establishes penalties for parties on both sides of the prohibited transaction ranging from a fine per violation of up to $25,000 to imprisonment for up to five years. A successful conviction under the Anti-Kickback statute requires proof that a defendant intended to engage in illegal activity, though not necessarily proof that a defendant knew the activity violated the Anti-Kickback statute specifically.

The OIG has adopted various "safe harbors" to the Anti-Kickback statute, which create a presumption of legality for arrangements that meet their criteria. Structuring physician compensation arrangements to comply with a specific safe harbor – such as the employment or the personal services and management contracts safe harbor – can help ensure that physicians, their employers, and other parties paying for physician services avoid the Anti-Kickback statute's significant penalties.

Impact on Physicians:

This is the third fraud alert in three years in which the OIG has focused on individual physician behavior. The alert was spurred by settlement agreements the OIG recently reached with 12 individual physicians accused of entering into questionable compensation arrangements. The OIG pointed to three major violations of the Anti-Kickback statute by these physicians: (1) the payments received by the physicians took into account the physicians' volume or value of referrals and the payments did not reflect the fair market value for the services the physicians performed; (2) the physicians themselves did not provide the actual services required under the agreements; and (3) some of the physicians had entered into arrangements in which a healthcare entity affiliated with the party paying for the physicians' services also paid the salaries of the physicians' office staff, which constituted additional improper remuneration.

The Fraud Alert puts individual physicians on further notice that compensation arrangements could have Anti-Kickback implications if they are not carefully structured. Because the Anti-Kickback statute is an intent-based statute, issuance of a fraud alert makes proof of intent a smaller hurdle for the government. Physicians should also be aware of the OIG's continuing focus on individual physicians along with large healthcare groups and other healthcare providers. Physicians should thus be careful to structure their compensation arrangements so that they fit within a safe harbor to the Anti-Kickback statute and avoid arrangements that are considered "red flags," such as bonuses based on patient referrals and certain percentage-based payment arrangements.

Impact on Hospitals and Other Healthcare Providers:

Compensation arrangements in violation of the Anti-Kickback statute implicate both parties to the agreement. As a result, hospitals and other healthcare providers must also ensure that medical director agreements and other physician compensation agreements are structured in compliance with the Anti-Kickback statute. Meeting the requirements of the personal services and management contract safe harbor to the Anti-Kickback statute is one way to avoid liability. Compliance with that safe harbor requires that the contract between the healthcare provider and a physician meet the following requirements:

  1. The agreement is set out in writing and signed by the parties.
  2. The agreement covers all of the services the physician provides to the principal for the term of the agreement and specifies the services to be provided by the physician.
  3. If the agreement is intended to provide for the services of the physician on a periodic, sporadic or part-time basis, rather than on a full-time basis for the term of the agreement, the agreement specifies exactly the schedule of such intervals, their precise length, and the exact charge for such intervals.
  4. The term of the agreement is for not less than one year.
  5. The aggregate compensation paid to the physician over the term of the agreement is set in advance, is consistent with fair market value in arms-length transactions and is not determined in a manner that takes into account the volume or value of any referrals or business otherwise generated between the parties for which payment may be made in whole or in part under Medicare, Medicaid or other federal healthcare programs.
  6. The services performed under the agreement do not involve the counselling or promotion of a business arrangement or other activity that violates any state or federal law.
  7. The aggregate services contracted for do not exceed those which are reasonably necessary to accomplish the commercially reasonable business purpose of the services.

OIG guidance has also suggested several best practices that providers and hospitals should employ for physician compensation arrangements, including maintaining time logs and other accounts of services performed by physicians, implementing and maintaining a compliance program, and ensuring there is a legitimate business justification for any arrangement with a physician.

When entering into a compensation arrangement, both parties must ensure that the physician's compensation reflects the fair market value of the services provided and is not determined in any way by the number or value of patient referrals. Compensation can include anything of value and is not limited simply to a paycheck. To avoid Anti-Kickback liability, physicians and healthcare providers should carefully structure physician compensation arrangements in such a way that they meet the requirements of an applicable safe harbor.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions