In a Fraud Alert issued on June 9, 2015, the U.S. Department of Health and Human Services Office of Inspector General (OIG) notified the healthcare community that physician compensation arrangements are on the OIG’s radar screen. While many physician compensation arrangements may be legitimate, the OIG has noted that “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’s recent Fraud Alert signals that the agency is scrutinizing physician compensation arrangements and will focus on them for the foreseeable future. This alert comes after the OIG recently reached settlements with 12 physicians who entered into medical directorships and other arrangements, which the OIG concluded violated the Federal Anti-Kickback Statute. In those cases, the arrangements appeared to be illegal for one or more of the following reasons.

  • The payments to the physicians took into account the physicians’ volume or value of referrals.
  • The payments did not reflect fair market value for the physicians’ services.
  • The physicians did not actually provide the services required under the agreements.
  • The entities contracting the physicians paid the salaries of the physicians’ front office staff.

Certain physician compensation arrangements – and particularly medical director arrangements – are perceived as risk areas for Anti-Kickback Statute violations. Facilities and physicians entering into such arrangements should review existing and new arrangements for compliance in light of this Fraud Alert and should seek the expertise of health care legal counsel.