Beware of Inappropriate Physician Compensation Arrangements

“Physicians who enter into compensation arrangements such as medical directorships must ensure that those arrangements reflect fair market value for bona fide services the physicians actually provide,” warns the new fraud alert published by the Office of Inspector General (OIG).

The OIG regularly issues fraud alerts to publicize its concerns about “possible widespread and abusive health care industry practices” and physician compensation arrangements have frequently been the focus of agency action. The new fraud alert stems from the arrangements involving 12 individual physicians “who entered into questionable medical directorship and office staff arrangements,” which, according to the government, may have violated the anti-kickback statute.

The agreements, alleged the agency, included payments for medical directorships that took into account the physicians’ volume or value of referrals and did not reflect fair market value for the services to be performed. The fraud alert goes on to state that because the physicians did not actually provide the services called for under the agreements, the arrangements may have constituted improper remuneration under the anti-kickback statute. The government also alleged that there were payments by an affiliated healthcare entity for the salaries of certain physicians’ front office staff which relieved a financial burden the physicians would otherwise have incurred.

“A compensation arrangement,” noted the OIG, “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.”

Inappropriate compensation arrangements may lead to criminal charges. In 2013, for example, criminal charges were brought against a New Jersey laboratory and certain of their referring physicians where the lab offered to remunerate physicians in the form of lease, service, and/or consulting agreements in exchange for referrals.

A June 12, 2015 ModernHealthcare article reported that the OIG is hiring additional attorneys to analyze the questionable payment arrangements addressed by the fraud alert and to take administrative actions against doctors if necessary.

Physicians should pay close to attention to the terms of compensation arrangements before signing on the dotted line.

If you are facing an investigation or have any questions regarding this fraud alert, the anti-kickback statute, or any other health law matters, please contact our office.