On the heels of reaching settlement agreements with 12 individual physicians who entered into what the U.S. Department of Health and Human Services’ Office of Inspector General (OIG) called “questionable medical directorship and office staff arrangements,” the OIG issued a Fraud Alert on June 9, 2015, to warn physicians that their compensation arrangements may result in significant liability and to remind them to ensure that their compensation arrangements “reflect fair market value for bona fide services the physicians actually provide.” In the Fraud Alert, the OIG noted that while many compensation arrangements are legitimate, “a compensation arrangement may violate the anti-kickback statute if 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.” 

The OIG described its recent civil monetary penalty settlements with 12 physicians, alleging that the compensation paid to the physicians under the medical directorships constituted improper remuneration under the anti-kickback statute. Among other reasons, the OIG determined that the compensation was improper because the payments took into account the volume or value of the physicians’ referrals and did not reflect the fair market value of the services to be performed. In addition, the OIG alleged that the physicians did not actually perform the medical director services called for under the agreements. The OIG also alleged that some of the physicians entered into arrangements under which an affiliated health care entity paid the salaries of the physicians’ front office staff, which constituted improper remuneration to those physicians because the arrangements relieved the physicians of a financial burden they otherwise would have incurred. 

While the OIG does not name the 12 physicians in the Fraud Alert, the names and some details about each of the physicians with whom the OIG reached settlements is available on the OIG’s website. All of the settlements involved physicians who had compensation arrangements with Fairmont Diagnostic Center and Open MRI Inc. (Fairmont), an imaging facility located in Houston, Texas, and Fairmont’s owner, Jack L. Baker, M.D., who paid $650,000 in 2012 to resolve allegations that he paid illegal compensation to physicians to induce them to refer patients to Fairmont. Dr. Baker was also excluded from participating in federal health care programs for six years as part of his settlement. Here are some details about the 12 physicians whose settlements prompted the OIG Fraud Alert:

  • October 17, 2014 - Dr. Jimmy Dung Doan, a Houston, Texas family practice physician, entered into a settlement agreement with the OIG pursuant to which Dr. Doan agreed to pay $50,000 to resolve allegations that he received remuneration from Jack L. Baker, M.D., and Fairmont in the form services received under a Referral Coordinator contract.
     
  • October 17, 2014 - Dr. Dan Kelly Eidman, a Houston, Texas orthopedic surgeon, entered into a settlement agreement with the OIG pursuant to which Dr. Eidman agreed to pay $50,000 to resolve allegations that he received remuneration from Dr. Baker and Fairmont in the form of monthly payments made under a Medical Director contract.
     
  • October 2, 2014 - Dr. Robert L. Burke, a Houston, Texas orthopedic surgeon, entered into a settlement agreement with the OIG pursuant to which Dr. Burke agreed to pay $99,000 settlement to resolve allegations that he received remuneration from Dr. Baker and Fairmont in the form of money paid above a compensation rate negotiated in a Medical Director agreement.
     
  • September 9, 2014: Dr. Thanh A. Nguyen, a Houston, Texas urologist, entered into a settlement agreement with the OIG pursuant to which Dr. Nguyen agreed to pay $60,000 to resolve allegations that he received remuneration from Dr. Baker and Fairmont in the form of compensation from a medical director agreement.
     
  • August 11, 2014: Dr. Gary Stephen Hurwitz, a Houston, Texas urologist, entered into a settlement agreement with the OIG pursuant to which Dr. Hurwitz agreed to pay $170,000 to resolve allegations that he received remuneration from Dr. Baker and Fairmont in the form of compensation from a medical director agreement.
     
  • August 11, 2014: Dr. Dilipkumar Chotabhai Patel, a LaPorte, Texas primary care doctor and internist, entered into a settlement agreement with the OIG pursuant to which Dr. Patel agreed to pay $146,000 to resolve allegations that he received remuneration from Dr. Baker and Fairmont in the form of compensation from a medical director agreement.
     
  • June 26, 2014: Dr. Steven A. Fein, a Houston, Texas gastroenterologist, entered into a settlement agreement with the OIG pursuant to which Dr. Fein agreed to pay $118,944 to resolve allegations that he received remuneration from Dr. Baker and Fairmont in the form of compensation from a medical director agreement and from the benefit of a referral coordinator whose compensation was paid by Fairmont.
     
  • June 26, 2014: Dr. Jerry McShane, a Houston, Texas occupational health specialist, entered into a settlement agreement with the OIG pursuant to which Dr. McShane agreed to pay $134,200 to resolve allegations that he received remuneration from Dr. Baker and Fairmont in the form of compensation from a medical director agreement and from the benefit of a referral coordinator whose compensation was paid by Fairmont.
     
  • April 24, 2014: Dr. Scott Houson Hung, a family practice physician in Houston, Texas, agreed to be excluded from participating in federal health care programs for a period of three years under 42 U.S.C. § 1320a-7a(a)(7), 1320a-7(b)(6)(B) and 1320a-7(b)(7). The OIG alleged that Dr. Hung received remuneration from Dr. Baker and Fairmont in the form of compensation from a medical director agreement. The OIG further alleged that the physician admitted to the Texas Medical Board that his medical practice fell below the standard of care in the treatment of eight patients and that he provided controlled substances to the patients without appropriate treatment plans or documentation. Dr. Hung did not pay a monetary settlement to resolve the allegations.
     
  • January 6, 2014: Dr. Amir Ghebranious, a Houston, Texas family practice physician, entered into a settlement agreement with the OIG pursuant to which Dr. Ghebranious agreed to pay $195,016 to resolve allegations that he received remuneration from Dr. Baker and Fairmont in the form of compensation from a medical director agreement and from the benefit of a referral coordinator whose compensation was paid by Fairmont.
     
  • January 6, 2014: Dr. Mary Campbell-Fox, a Houston, Texas family practice physician, entered into a settlement agreement with the OIG pursuant to which Dr. Campbell-Fox agreed to pay $195,016 to resolve allegations that she received remuneration from Dr. Baker and Fairmont in the form of compensation from a medical director agreement and from the benefit of a referral coordinator whose compensation was paid by Fairmont.
     
  • August 28, 2013: Dr. Victor Van Phan, a Houston, Texas orthopedist, and his orthopedic practice Victor Van Phan, D.O., P.A., entered into a settlement agreement with the OIG pursuant to which Dr. Van Phan agreed to pay $188,000 to resolve allegations that he and his practice received remuneration from Dr. Baker and Fairmont in the form of compensation from personal services agreements and employment compensation for Dr. Van Phan to serve as a medical director for Fairmont.

While nothing in the Fraud Alert breaks new ground or indicates any significant change in policy by the OIG, the fact that the OIG recently pursued enforcement actions against these 12 physicians is noteworthy as settlements under the anti-kickback statute with physicians are not very common. These settlements, coupled with the Fraud Alert, may be a signal to the industry that the OIG intends to look more closely at the physicians involved in questionable arrangements rather than just focusing on hospitals and other larger health care providers that have traditionally borne the brunt of enforcement actions under the anti-kickback statute. Hospitals and other health care providers that have struggled to get physicians to recognize the importance of their compliance activities and take seriously the concept of compliance may find the Fraud Alert and recent settlements with the 12 physicians to be useful tools in gaining buy-in for their compliance program efforts.