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Billing for services rendered by physician subcontractor
Facts
A general ophthalmology practice contracts with a retina specialist to provide services to its patients. The agreement with the retina specialist is on a part-time basis and classifies the specialist as an independent contractor. The practice bills and receives payment for the office-based services provided by the retina specialist. The practice also bills and receives payment for surgical procedures provided to the practice’s patients by the specialist at a nearby ambulatory surgery center. The practice’s cataract surgeons and other non-ophthalmic surgeons own the ASC. The retina specialist is paid 30% of the net collections attributable to the services he performs.
May the practice bill and compensate a physician independent contractor based on a physician-generated revenue percentage?
This proposed arrangement raises issues under the federal Anti-Kickback Statute as well as the anti-kickback statute in states that have similar prohibitions. That statute makes it a violation of both criminal and civil law for any person to knowingly and willfully pay anything, directly or indirectly, in cash or in kind, to reward or induce a referral for any service covered by a federally funded health care program. Safe harbor regulations promulgated by the Office of the Inspector General provide protection for certain personal service arrangements. To qualify for the safe harbor, however, payment must be fixed, set in advance, and not vary with the value or volume of referrals.
An arrangement need not comply with a safe harbor to avoid violating the statute, however. In situations where a safe harbor does not apply, the government is likely to focus on the question of whether a relationship reflects fair market value. Where it does not, there is concern that there may be intent to reward or induce referrals. Here, the government might question whether 30% reflects fair market value for the retina specialist’s services or, perhaps more appropriately, since the practice is the source of referrals for the retina specialist, whether the practice’s retention of 70% of revenue is reasonable to cover the overhead of the practice. The analysis of the appropriateness of the arrangement must include consideration of the fact that, with respect to surgical services, most of the related overhead is being borne by the ambulatory surgery center, not the practice.
The arrangement also could raise concerns under state fee-split prohibitions. Although some state medical boards are not inclined to challenge the propriety of percentage-based compensation arrangements when such arrangements occur within physician group practices, other boards find these kinds of terms to be inappropriate, even within the context of a group practice.
Finally, until recently, this arrangement would have been out of compliance with the Medicare reassignment rules. Those rules generally prohibit anyone other than the person who actually provides a service from collecting the payment for the service. There are exceptions to the reassignment prohibition; prior to 2003, the most relevant exception would allow the practice to bill for services rendered by an independent contractor as long as those services are provided in premises owned or leased by the practice. This, however, would have limited the practice to bill for the office-based services rendered by the specialist but not services performed at the ASC because it is not an asset or a wholly owned subsidiary of the practice. As the result of statutory amendments in 2003, however, the exception to the reassignment rule has been broadened to include services performed by independent contractors at any location.
For Your Information:
- Alan E. Reider, JD, can be reached at Arent Fox PLLC, 1050 Connecticut Ave. NW, Washington, DC 20036; 202-857-6462; fax: 202-857-6395; e-mail: reider.alan@arentfox.com.