The U.S. Department of Health & Human Services Office of Inspector General (OIG) issued a special fraud alert on June 9, 2015, stating that physician compensation arrangements may result in significant liability. Hopefully this is not a surprise to any physician or entity that treats federal health plan beneficiaries. However, given that, historically, OIG regulatory actions largely (although not exclusively) focused on the entity from which a physician received compensation, such as hospitals, laboratories, durable medical equipment suppliers, pharmacies, etc., the June 9, 2015, fraud alert highlights the potential for physician liability in these arrangements.

In the case discussed by OIG, 12 individual physicians settled with the OIG regarding arrangements including medial director compensation that varied with physicians’ referrals and payment of salaries for the physicians’ front-office staff. Even without the OIG fraud alert, these arrangements should have raised concerns under existing OIG guidance. Importantly, the OIG only deals with the federal anti-kickback statute (42 U.S.C. §1320a-7b(b)); so, even though the fraud alert does not mention the Stark Law (42 U.S.C. §1395nn) or state law, the types of arrangements discussed in the fraud alert are also likely to create risk under the Stark Law and may implicate state anti-kickback or anti-referral laws.

Accordingly, the takeaway lesson from the OIG fraud alert is that an arrangement should be carefully reviewed for compliance with anti-kickback and anti-referral laws if the arrangement involves compensation between a physician and an entity to which the physician may refer federal health plan beneficiaries – the OIG may be more closely scrutinizing these arrangements, and, in the OIG fraud alert scenario, it is likely that several hours of legal advice could have avoided substantial financial penalties, other sanctions, and a lot of sleepless nights.