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Office of the Inspector General looks more closely at physician compensation arrangements
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From international law firm Arnold & Porter LLP comes a timely column that provides views on current regulatory and legislative topics that weigh on the minds of today’s physicians and health care executives.
On June 9, the Office of the Inspector General (OIG) issued a fraud alert titled “Physician Compensation Arrangements May Result in Significant Liability.” Although payment to physicians by referral sources has long been a concern in connection with potential kickback law violations, many arrangements have been structured to fall within the personal services safe harbor, where such payments are protected as long as they comply with the following seven requirements:
Alan E. Reider
• The arrangement must be reflected in a written agreement, signed by the parties;
• The agreement must cover all the services to be provided during the term of the agreement;
• If not for full-time services, the agreement must reflect the precise timeframe when the services are provided;
• The agreement is for at least 1 year;
• The amount paid is set in advance, reflects fair market value, and is not determined in a manner that takes into the account the volume of value of any referrals;
• The services do not involve the promotion of any activity that violates state or federal laws; and
• The services do not exceed those that are reasonably necessary to accomplish the commercially reasonably business purpose.
To obtain protection under the regulation, each of the criteria articulated above must be met.
The OIG’s issuance of the fraud alert was triggered by a series of recent enforcement cases in which the OIG identified several instances where agreements with physicians did not meet these criteria. The OIG noted that, in some cases, the payments did not reflect the fair market value of the services provided, some payment amounts took into account the volume of value of the referrals, and other arrangements failed because the physicians did not provide the services required under the agreements. In addition, at least one case was based on the fact that a referral source had paid the salaries of certain staff members of the physician practice, thereby relieving the physician of a financial obligation.
We are aware that many physicians have entered into medical director agreements with facilities such as surgery centers or hospitals, with every intention of fulfilling those duties and responsibilities. We also are aware that physicians may be distracted and not always fulfill those responsibilities or, more frequently, may fail to document that they have performed the duties required under the agreement. The fraud alert issued by the OIG is a reminder that any agreement between a physician and a referral source should be monitored periodically to assure compliance.
Alan E. Reider, JD, MPH, a partner at Arnold & Porter LLP, can be reached at mailto:alan.reider@aporter.com.