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OIG Issues Fraud Alert on Physician Compensation
June 9, 2015

On June 9, 2015 the Office of Inspector General of the Department of Health and Human Services (OIG) issued a fraud alert warning that physician compensation arrangements may violate the federal anti-kickback statute.  The fraud alert cautions physicians they have a responsibility to insure that their financial relationships, such as medical director agreements, are for “bona fide services the physicians actually provide” and that “those arrangements reflect fair market value.”  The OIG took the opportunity to publicize that it recently settled cases against 12 physicians who entered into medical director agreements and other arrangements which the OIG believed were for compensation to induce the physicians to refer or direct business to the entity paying the compensation to the physicians. 

The anti-kickback statute is a criminal statute that prohibits “knowingly and willfully” providing anything of value to induce a person to refer or otherwise drive business to the person paying the compensation.  The anti-kickback statute, which is enforced by the OIG, is often confused with the federal physician self-referral statute (the Stark law) which is a different federal law and is not a criminal statute.  The Stark law is a strict liability law (where good intentions are not a defense), which requires physician financial relationships to fit into an exception in order for the physician to be permitted to refer Medicare patients for certain “designated health services” to the entity with whom the physician has the financial relationship.  The Stark law has garnered significant attention in recent years for high-dollar settlements to which providers (but less frequently physicians) have been subjected.

This fraud alert draws attention back to the anti-kickback statute, and signals the OIG’s increasing willingness to pursue the physicians who receive compensation the OIG believes is suspect, instead of just the large organizations that compensate physicians.  Historically, the OIG was more likely to go after big companies with “deep pockets” that pay physicians, rather than the physicians on the receiving end of the compensation arrangements.  Now, the OIG is pursuing physicians more frequently.  This fraud alert “encourages physicians to carefully consider the terms and conditions of medical directorships and other compensation arrangements before entering them.”  Clearly, the OIG does not want physicians simply relying on the fact that a “big company” is offering them a contract, and concluding it therefore must be a legitimate arrangement.

For additional information, please contact Charles Oppenheim, David Henninger or Brad Tully in Los Angeles at 310.551.8111; Mark Johnson in San Diego at 619.744.7300; Ben Durie in San Francisco at 415.875.8500; or William Eck in Washington, D.C. at 202.580.7700. 

For media inquiries, please contact Barrett McBride at 916.456.5855.