The Department of Health and Human Services Office of the Inspector General (OIG) issued a Fraud Alert on June 9, 2015, reminding physicians that they will be held liable under the anti-kickback statute for compensation arrangements that do not reflect fair market value compensation for bona fide services that the physicians actually provide.  The Legal Alert comes at the heels of settlements reached between the OIG and 12 individual physicians resolving liability under the Civil Monetary Penalties Law. The OIG had alleged that the physicians had entered into illegal medical directorship arrangements because the compensation to the physicians depended on their referral volume, did not reflect fair market value, and were for services not actually rendered. The OIG also alleged that an affiliated health entity paid the salary of the physicians’ front office staff, constituting improper remuneration to the physicians, since it relieved the physicians of financial burdens they otherwise would have incurred.

Physician compensation arrangements have been subject to scrutiny by the OIG and the Department of Justice for many years.  However, this Fraud Alert is particularly notable because it focuses solely on physicians, as opposed to the health care entities contracting with them, and may signal that the OIG is ramping up enforcement efforts to pursue individual physicians who enter into non-compliant medical director and other contractual arrangements with health care providers.  In the past, the OIG has not traditionally focused its enforcement on physicians for these types of violations, instead opting to pursue the deeper pockets of the organizations that contract with them.

We recommend that physicians and the health care providers they contract with carefully review the terms and conditions of any prospective compensation arrangements to ensure that the arrangements reflect fair market value for actual services provided.