Closely Scrutinize Arrangements with Physicians

Pay close attention to the arrangements your laboratory makes with physicians, because the government will too. The U.S. Department of Health and Human Services Office of Inspector General (OIG) recently issued another Fraud Alert targeting payments to physicians. In a June 9, 2015 Fraud Alert, the OIG focused on medical directorships and similar compensation arrangements with physicians, noting recent settlement with 12 physicians with regard to “questionable medical directorship and office staff arrangements.” Typically, the arrangements at issue with medical directorships are those between hospitals and health systems and physicians that refer to the hospital. Note that in June last year, the OIG also issued a Fraud Alert, which directly addressed laboratories and payments to physicians. Additionally, the Biodiagnostic Laboratory Services case, which we have reported on multiple times, has involved criminal charges and even prison sentences for physicians who the government alleged had consulting and services arrangements with the laboratory. The government alleged payments under those arrangements were really kickbacks for referrals—which is the same risk this fraud alert highlights.

“Although many compensation arrangements are legitimate, 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,” said the OIG in this latest Fraud Alert. The OIG cautioned physicians to “carefully consider the terms and conditions of medical directorships and other compensation arrangements before entering them” and ensure they exchange fair market value compensation for bona fide services that the physician really does provide.

Factors and circumstances that the OIG found concerning in prior arrangements include:

• compensation that “took into account the physicians’ volume or value of referrals,”

• compensation greater than fair market value,

• physicians failing to provide services as described in the agreement, and

• physician office staff salaries paid by affiliated entities (relieving the physician of that financial cost and thus benefitting the physician).

To avoid such compliance problems, the OIG suggested consulting its compliance program documents and other guidance available on the OIG’s website. Laboratory compliance officers should ensure any arrangement that yields some payment or other benefit to a physician receives appropriate scrutiny to avoid any potential kickback risks.