On June 9, 2015, the Office of the Inspector General of the US Department of Health and Human Services (“OIG”) issued a fraud alert entitled: Physician Compensation Arrangements May Result in Significant Liability.

This isn’t the first time the OIG has warned providers and physicians about questionable compensation relationships for medical director or administrative services. The OIG advised that compensation arrangements such as medical directorships must be fair market value for bona fide services the physicians actually provide. The OIG cited to its recent settlements with 12 individual physicians who entered into questionable medical directorship and office staff arrangements as the primary reason for the issuance of the fraud alert.

The OIG is concerned about arrangements 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. In each of the 12 recent settlements, the OIG alleged that illegal remuneration was paid to physicians for referrals. In differing cases, the OIG alleged that :(1) payments took into account the physicians’ volume or value of referrals and did not reflect fair market value for the services to be performed; (2) physicians did not actually provide the services called for under the agreements; or (3) physicians had entered into arrangements under which an affiliated health care entity paid the salaries of the physicians’ front office staff.

The fraud alert reminds providers that medical director and administrative services arrangements with physicians in a position to refer must be for legitimate and appropriate services as well as provide for fair market value compensation.

A copy of the fraud alert can be found here –>http://oig.hhs.gov/compliance/alerts/guidance/Fraud_Alert_Physician_Compensation_06092015.pdf