OIG Issues Fraud Alert Regarding Physician Compensation

The U.S. Department of Health and Human Services Office of Inspector General (OIG) has medical directorships and other physician compensation arrangements in its crosshairs. While not a novel issue, the OIG highlighted the kickback risks of such arrangements in a June 9, 2015 Fraud Alert, noting it has reached settlement with 12 physicians with regard to "questionable medical directorship and office staff arrangements."

"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 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
• 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 the Compliance Program Guidance for Individual and Small Group Physician Practices and the OIG's Roadmap for New Physicians: Avoiding Medicare and Medicaid Fraud and Abuse, both of which are available on the OIG's website.

Typically, the arrangements at issue with medical directorships are those between hospitals and health systems and physicians that refer to the hospital. It's worth noting that another Fraud Alert issued in June last year, which directly addressed laboratories, also included a focus on payments to physicians. Further, 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.

Takeaway: Payments by providers to physicians who are referral sources continue to be an enforcement target.