Prompted by recent settlements with 12 individual physicians who were parties to questionable medical directorship and office staff arrangements, the Office of Inspector General (OIG) on June 9 released a fraud alert, Physician Compensation Arrangements May Result in Significant Liability. The OIG is judicious in its publication of fraud alerts, and thus the subject matter merits special attention by providers.
The OIG strongly encourages physicians to confirm any financial arrangement with a hospital or other healthcare provider reflects fair market value for the services provided. The enforcement agency warns that liability for an improper financial arrangement extends to the physician as well as the party making payment to the physician:
Physicians who enter into compensation arrangements such as medical directorships must ensure that those arrangements reflect fair market value for bona fide services the physicians actually provide. Although many compensation arrangements are legitimate, 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.
To protect themselves from allegations of wrongdoing under the fraud and abuse laws, physicians should be prepared to demonstrate the fair market value of any financial arrangement with another healthcare provider, including employment agreements, medical directorships, staffing arrangements, and space and equipment leases. Otherwise, the arrangement is subject to challenge as illegal remuneration for referrals.
Important safeguards include having a written agreement that specifically defines the parties’ respective rights and responsibilities, maintaining contemporaneous documentation of services provided (e.g., time logs), and ensuring adequate research has been performed to demonstrate the agreement is at fair market value. If in question, it is always advisable to secure a fair market value opinion from a qualified, independent third party.
The OIG’s warnings regarding physician compensation arrangements are not hollow threats: the agency’s website details numerous enforcement actions involving alleged violation of the Anti-Kickback Statute. These enforcement actions all have a common theme: the parties to the arrangement are unable to prove fair market value for the goods or services involved.
At the conclusion of the fraud alert, the OIG encourages anyone “with information about physicians or other providers engaging in any of the activities described above” to contact the OIG Hotline. Providers should take appropriate action to ensure they don’t end up the subject of such a report.
