On June 9, 2015, the Department of Health and Human Services Office of Inspector General (OIG) released a Fraud Alert entitled, "Physician Compensation Arrangements May Result in Significant Liability." The Alert is an excellent example of the increased scrutiny on physician compensation models, and especially on those physicians who receive remuneration based on creative staffing arrangements or medical directorships. The alert focuses on the OIG’s recent settlement with twelve physicians who entered into agreements with a healthcare entity. While the Fraud Alert does not name the physicians in the settlement, OIG’s website reveals that the settlement involves compensation arrangements with a diagnostic center, and that the "questionable medical directorship and office staff arrangements" were not reflective of the fair market value for the services provided.

In its alert, OIG alleged that the compensation paid under the medical directorship arrangements was improper remuneration under the Anti-kickback Statute for several reasons, including:

  1. The payments made to the physicians were based in part on the physicians’ volume or value of referrals
  2. The payments did not reflect fair market value for the services to be performed, and
  3. The physicians did not actually provide the medical directorship services called for under the agreements.

Additionally, the OIG alleged that some physicians had entered into arrangements under which an affiliated health care entity paid the salaries of the physicians’ front office staff. As explained by the Alert, "because these arrangements relieved the physicians of a financial burden they otherwise would have incurred, the OIG alleged that the salaries paid under these arrangements constituted improper remuneration to the physicians." The OIG’s investigation found "that the physicians were an integral part of the scheme and subject to liability under the Civil Monetary Penalties Law."

This determination serves as a reminder that OIG is constantly monitoring physician compensation models, and that all arrangements are under increased regulatory scrutiny. To stay on the straight and narrow, OIG’s alert provided a link to an older publication, entitled, "A Roadmap for New Physicians: Avoiding Medicare and Medicaid Fraud and Abuse." In this document, the OIG states that, as a physician, if "you choose to accept a medical directorship at a nursing home or other facility, you must be prepared to assume substantial professional responsibility for the care delivered at the facility." The OIG defines a medical director as someone who will: (1) Actively oversee clinical care in the facility; (2) Lead the medical staff to meet the standard of care; (4) Ensure proper training, education, and oversight for physicians, nurses, and other staff members; and (5) Identify and address quality problems. Anything less, and physicians may find themselves on the wrong side of an investigation by State and Federal authorities.