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The Office of the Inspector General of the Department of Health and Human Services (“OIG”) issued a warning earlier this month to physicians. The OIG enforces healthcare laws including the Stark Law and Anti-Kickback statute. Federal law prohibits hospitals from offering anything of value in exchange for certain healthcare business. Physicians can be paid for their services but not for sending Medicare patients to hospitals.

In recent years, there have been many prosecutions of hospitals for violating anti-kickback rules. Long gone are the days when a hospital would reward doctors bringing in patients with a cash bonus. Now, the “kickbacks” or bribes are more concealed.

Compensation agreements between hospitals and doctors are always scrutinized carefully. On June 9th, the OIG issued a written fraud alert to warn hospitals and doctors of new schemes that they see as problematic. This is only the fourth time in five years that the OIG issued a written fraud alert.

According to the Department of Health and Human Services, doctors who enter into compensation arrangements such as medical directorships must ensure that those arrangements reflect fair market value for services actually provided. Even if a compensation package is otherwise legal, it can still violate the law if just one of its purposes is designed to compensate the physician for bringing in Medicaid or Medicare patients.

The written guidance specifically addresses “medical directorship” arrangements.  The OIG believes some doctors are being given titles and extra pay simply because they bring in more patients. To avoid violating the law, a doctor offered a directorship must actually perform the duties of a medical director and his or her compensation must be reasonable.

Also called into question are arrangements in which the hospital agrees to reimburse the physician for office staff expenses.

Many people believe that the definition of a kickback is limited to money.  Actually, the regulations extend to anything of value. Reimbursing staff expenses saves the doctor money. Therefore it is considered compensation.

Traditionally, prosecutions have been directed at hospitals. Recently, however, the OIG successfully challenged 12 physicians who had received medical directorships or were reimbursed for office staff. All 12 doctors settled.

Another word of caution, even if the hospital funnels the money through an affiliated entity instead of making the payment directly, the result will be the same.

Although not mentioned in the alert, we have seen recent prosecutions of hospitals that have tried to circumvent the anti-kickback rules by offering certain physicians teaching or research stipends. Again, unless the work is actually performed, the arrangement will likely fail.

The purpose of the anti-kickback law is to prevent overutilization of healthcare services, prevent corruption in medical decision making and stop unfair competition. By publishing the guidance, the department hopes to help physicians avoid big fines and possible criminal prosecution.

Doctors are a frequent target of kickback schemes because they decide what medications their patients receive, what specialists they see and to what hospitals they must go when inpatient care is needed.

Catching fraud has become easier as more and more healthcare workers discover the False Claims Act and become whistleblowers. That law allows a whistleblower with inside information to receive up to 30% of whatever the government receives from wrongdoers. We have seen a definite uptick in whistleblower cases brought by office staff of both hospitals and medical practices.

Lest you think the risk is small, last year the government paid $635 million to whistleblowers. Most of the claimants had filed Medicare fraud complaints.

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