Safely Contract With Physicians
On June 9, 2015, the Office of Inspector General (OIG) of the U.S. Department of Health and Human Services, the primary enforcer of fraud and abuse prohibitions, issued a Special Fraud Alert entitled “Fraud Alert: Physician Compensation Arrangements May Result in Significant Liability.” In this Special Fraud Alert, the OIG encourages physicians to carefully consider the terms and conditions of medical directorships and other compensation arrangements with providers to which they make referrals before entering into them.
Specifically, the OIG stated that the following are violations of the anti-kickback statute:
Payments to physicians that take into account the volume or value of referrals from physicians to providers who make them
Payments in excess of fair market value for the services performed by physicians
Physicians who did not actually perform the services required by agreements with providers to which they make referrals
Relieving physicians of expenses they would otherwise have incurred
The OIG has clearly fired a warning shot over the bows of providers! Now is the time to get it right! What does “getting it right” mean?
At a minimum, providers should meet all of the requirements of the personal services and management contract safe harbor or exception under the federal anti-kickback statute. This exception or "safe harbor" says that illegal remuneration does not include payments made by providers who receive referrals to physicians who make referrals as compensation for services provided by them, as long as all of the following standards are met:
The agreement is set out in writing and signed by both parties.
The agreement specifies the services to be provided by the physician.
The agreement must indicate whether physicians will provide services on a part-time basis for the term of the agreement and the charge for such services.
The term of the agreement is for not less than one year.
The compensation paid to physicians over the term of the agreement is set in advance, is consistent with fair market value in arms-length transactions, and is not determined in a manner that takes into account the volume or value of any referrals or business otherwise generated between the parties.
The services preformed serve a commercially reasonable business purpose.
If all of these criteria are met, physicians and providers to which they make referrals are within the applicable safe harbor.
Providers whose services are defined as designated health services (DHS) must also meet the requirements of the contractual exception under Stark. DHS includes home health and HME services, among others. Hospice is not DHS. The requirements of this exception are basically the same as the safe harbor described above, except that, if the agreement is terminated in less than one year, then the parties may not enter into another agreement until a year after the agreement was effective.
In addition, some states have requirements that providers must meet in order to make payments to referring physicians. While these statutes vary from state to state, compliance with these so-called “mini Stark laws” is also essential.
There are many pitfalls for providers and physicians with regard to payments from providers to physicians who make referrals to them. Now is the time to dot the “i’s” and cross the “t’s” to get it right!
Elizabeth E. Hogue, Esq.
©2020 Elizabeth E. Hogue, Esq. All rights reserved.