HHS-OIG Fraud Alert: Physician Compensation Arrangements May Result in Significant Liability

 

Last week, the Department of Health and Human Services Office of Inspector General (OIG) released a fraud alert entitled “Physician Compensation Arrangements May Result in Significant Liability.” The OIG states that 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.” While the agency does not necessarily mention anything groundbreaking in the kickback arena, the OIG specifically noted its recent settlements with 12 individual physicians who entered into “potentially illegal medical directorships and office staff arrangements” as the impetus for the alert. 

The OIG did not name the 12 physicians in the Fraud Alert, but the individuals and a small summary about the alleged scheme are included on OIG’s website. It turns out that all 12 involved physicians had compensation arrangements with Fairmont Diagnostic Center and Open MRI Inc. (Fairmont) and settled with the OIG between 2013 and 2014. Fairmont and its founder Dr. Jack Baker settled allegations that the company entered these prohibited financial relationships including “sham personal services contracts,” for medical directorships back in 2012.  View the Fairmont False Claims Act settlement here.  

In the individual physician settlements, OIG alleged that the compensation paid under the medical directorship arrangements constituted improper remuneration under the anti-kickback statute for a number of reasons, including:

(1)  The financial arrangement took into account the physicians’ volume or value of referrals

(2)  The payments did not reflect fair market value for the services to be performed, and

(3)  The physicians did not actually provide the medical directorship services called for under the agreements. 

OIG also alleged that some of the 12 physicians had entered into arrangements under which an affiliated health care entity paid the salaries of the physicians’ front office staff. “Because these arrangements relieved the physicians of a financial burden they otherwise would have incurred, OIG alleged that the salaries paid under these arrangements constituted improper remuneration to the physicians,” the agency states. “OIG determined that the physicians were an integral part of the scheme and subject to liability under the Civil Monetary Penalties Law.”

Tips for Medical Directors

In an informative document released a few years ago entitled “A Roadmap for New Physicians: Avoiding Medicare and Medicaid Fraud and Abuse,” OIG outlined a long list of useful information for doctors to stay out of kickback trouble. The roadmap includes a list of “tips” for medical directors. OIG linked to this document in its latest fraud alert, so it is worth looking back on. 

“If you choose to accept a medical directorship at a nursing home or other facility, you must be prepared to assume substantial professional responsibility for the care delivered at the facility,” OIG states. “As medical director, patients (both your own patients and the patients of other attending physicians) and their families count on you, and State and Federal authorities may hold you accountable as well.”

To do this job well, physicians should, according to the agency:

• Actively oversee clinical care in the facility;
• Lead the medical staff to meet the standard of care; 
• Ensure proper training, education, and oversight for physicians, nurses, and other staff members; and
• Identify and address quality problems

The roadmap also offered a number of case examples for medical directors to take note of.

• A physician group practice paid the Government $1 million and entered into a 5-year Corporate Integrity Agreement to settle alleged violations of the AKS, FCA, and Stark law related to medical directorships with a medical center. Allegedly, the agreements were not in writing, the physicians were paid more than fair market value for the services they rendered, and the payment amounts were based on the value of referrals the physicians sent to the medical center. 
• Two orthopedic surgeons paid $450,000 and $250,000 to settle allegations related to improper medical directorships with a company that operated a diagnostic imaging center, a rehabilitation facility, and an ambulatory surgery center. The company allegedly provided the physicians with valuable compensation, including free use of the corporate jet, under the medical directorship agreements, which required the physicians to render limited services in return. The agreements with the physicians allegedly called for redundant services and served to encourage the physicians to refer their patients to the facilities operated by the company.

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The latest OIG alert publicizes some recent enforcement actions against individual physicians. The government has long said it will increasingly target individuals, and the agency has made clear through this notice that they are particularly interested in medical directorship agreements.