On June 9, the Office of the Inspector General issued a Fraud Alert highlighting the OIG’s intent to continue and to strengthen its focus on physicians who enter into questionable compensation arrangements with hospitals, nursing homes and similar providers. The OIG is stepping up its efforts in reviewing such arrangements to ensure that they both reflect fair market value for bona fide services rendered and that they comply with the Anti-Kickback Statute (AKS).  According to Kevin Barry, Deputy Chief of the Administrative and Civil Remedies Branch of the OIG’s Office of General Counsel, the OIG plans to hire additional attorneys to evaluate taking action against individual physicians for illegal remuneration. 

The OIG noted in the Fraud Alert that it recently entered into settlements with 12 physicians who received medical director compensation that exceeded fair market value for services rendered. In some cases, the institutional providers paid the salaries of the physicians’ office staff, which the OIG found to constitute illegal remuneration. 

Historically, the OIG’s enforcement actions in cases of this nature have focused more on institutional providers rather than physicians. Even if the OIG implements its expressed intent to focus on physicians, however, the risk to institutional providers is that investigations of physicians found to have received illegal remuneration will undoubtedly implicate the institutions that paid the excessive compensation. 

The most effective method that both physicians and institutions should take is to ensure prospective compliance by adhering to the requirements of the applicable AKS safe harbor, including especially, among other things, that:

  1. there should be a written contract for a term of at least one year;
  2. the compensation should be set in advance and consistent with fair market value;
  3. the services should be commercially reasonable; and
  4. the arrangement should not provide for services that exceed those services that are reasonably necessary to accomplish a commercially reasonable business purpose. 

As hospitals, health systems and other providers are leading industry endeavors to transform care models, physicians are being engaged to participate in a variety of arrangements, such as clinical co-management, bundled payment, gain-sharing and ACO initiatives. Care must be taken to ensure that physicians are not paid for the same service in multiple agreements and that the aggregate of all of the physician compensation for multiple services contained in one agreement is within fair market value.