Referrals may trigger an unwanted investigation

On June 9, the U.S. Department of Health and Human Services Office of Inspector General (OIG) issued a fraud alert cautioning physicians from entering into compensation arrangements which could violate the federal Anti-Kickback Statute. The Anti-Kickback Statute prohibits the exchange of anything of value in an effort to induce or reward the referral of patients or services covered by federal health programs. Violation of the statute can lead to substantial fines, imprisonment and exclusion from federal health care programs. The OIG alert states that physicians who enter into compensation arrangements – such as medical directorships and office staff arrangements – must ensure the arrangements reflect fair market value for bona fide services provided by the physicians to ensure legitimacy. 

Using settlements recently negotiated between OIG and 12 individual physicians as examples, OIG warns a compensation arrangement may trigger Anti-Kickback liability where “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”. Rather than simply pursuing the paying organization, in these situations OIG also pursued the individual physicians who entered into arrangements which compensated physicians in a manner OIG asserted was not reflective of fair market value for services to be performed, or provided payments for services called for but not actually performed by the physician. 

Some settlements stemmed from physicians who entered into medical director arrangements which in turn obligated an organization to pay the salaries of the physician’s office staff. Because the arrangements allegedly took into account the volume or value of referrals while alleviating the physician from the financial burden of compensating his or her staff in a manner purportedly not reflective of fair market value, OIG claimed such arrangement constituted improper remuneration and thereby violated the Anti-Kickback Statute. 

While OIG has traditionally focused Anti-Kickback scrutiny at hospitals and larger health care entities, the fraud alert, coupled with news of increased hiring of additional lawyers at OIG , could indicate the federal government is preparing to pursue more actions against physicians for questionable compensation arrangements. Physicians should carefully review such contracts and appropriately assess relationships that may be directly or indirectly tied to referrals.