A deeper dive into the OIG's kickback alert: Should physicians be worried?

In early June, HHS' Office of the Inspector General issued a fraud alert addressing physician compensation arrangements. Although the alert merely underscored current law, physicians should take notice of the government's warning.

The fraud alert warned that physicians must be careful when entering into compensation arrangements, including medical directorships. "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 healthcare program business," the OIG stated.

It's common knowledge in the healthcare industry that physicians are not permitted to be compensated for referrals of this nature, which raises the question, why did the OIG issue the alert? Larry Vernaglia, chair of Foley & Lardner's Health Care Industry Team, believes the alert was put out for two main reasons: to underscore the law and to serve as a reminder.

To underscore the law, the OIG outlined recent settlements reached with 12 physicians who entered into questionable medical directorships and office staff arrangements. The OIG highlighted the reasons the arrangements violated the Anti-Kickback Statute, including that the payments took into account the physicians' volume or value of referrals and did not reflect fair market value for the services to be performed.

As for the alert's second purpose, "It's reminding the industry that individual physicians aren't immune from liability just because they're not the ones with the deep pockets," says Mr. Vernaglia.

Another key observation Mr. Vernaglia made about the fraud alert was how short it is — the entire alert was barely one page. Mr. Vernaglia believes there is a reason for that. "I think the reason it's short is because it's meant to be given directly to physicians," he says. For instance, the alert could be used as a tool for hospitals to help get a physician to back down from an unreasonable demand.

Whether used during a physician compensation negotiation or just to brush up on the law, the fraud alert should put physicians on notice, as the OIG determined physicians were an "integral part" of the kickback scheme and subject to liability under the Civil Monetary Penalties Law. Those who commit fraud involving healthcare programs, including physicians, are subject to possible criminal, civil and administrative sanctions.

More articles on the Anti-Kickback Statute:

6 recent whistle-blower lawsuits in the healthcare industry
46 medical professionals charged in connection with $712M in false billings
Nursing home to pay $17M to settle kickback allegations brought by former CFO

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