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Physician compensation arrangements trigger Federal Alert
e-Reports, June 29, 2015
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On June 9, 2015, the federal Office of Inspector General (OIG) issued an uncharacteristic fraud alert about physician compensation. The alert was apparently triggered by recent federal settlements with 12 individual physicians who entered into “questionable medical directorship and office staff arrangements.”

The alert serves as a reminder that physicians who enter into compensation arrangements, such as medical directorships, must ensure those arrangements reflect fair market value for bona fide services the physicians actually provide.

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 past or future referrals of federal health care program business.

The OIG encourages physicians to carefully consider the terms and conditions of medical directorships and other compensation arrangements before entering into them.

The case of 12
The OIG alleged that compensation paid to the 12 physicians under the medical directorship and office staff arrangements constituted improper remuneration under the anti-kickback statute for a number of reasons, including:

  • Payments took into account the physicians’ volume or value of referrals and did not reflect fair market value for the services to be performed.
  • The physicians did not actually provide the services called for under the agreements.
  • An affiliated health care entity paid the salaries of the physicians’ front office staff, relieving the physicians of a financial burden they otherwise would have incurred.

The OIG determined the physicians were an integral part of the scheme and subject to liability under the Civil Monetary Penalties Law.

Proceed with caution
“Physician compensation arrangements have always been subject to scrutiny under the fraud and abuse laws,” said Julie Reed, ISMA general counsel. “Often times the party paying the compensation is the focus. This Federal Alert may signal a heightened interest in the physicians who are on the receiving end of those arrangements.”

Physicians presented with compensation arrangements should consult their own legal counsels for advice on what legal risk the agreements may pose and how to protect themselves. Those who commit fraud involving federal health care programs are subject to possible criminal, civil and administrative sanctions.

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