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Health Care Alert | Physician Compensation: An Improper Arrangement Could Mean a Significant Penalty

A Health Care Client Alert

By: Brandon M. Dalziel


On June 9, 2015, the Department of Health and Human Services Office of the Inspector General (OIG) issued a fraud alert regarding physician compensation.

Arrangements may potentially violate the anti-kickback statue or Stark law. According to the fraud alert, “[a]lthough 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 health care program business.”

The fraud alert states that the OIG has recently reached settlements with 12 physicians who entered into questionable medical directorship or other arrangements. The arrangements were improper for a number of reasons: payments took into account the physicians’ volume or value of referrals, did not reflect fair market value for the services to be performed, or were made for services that were never performed. The fraud alert notes that “[b]ecause 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. OIG determined that the physicians were an integral part of the scheme and subject to liability under the Civil Monetary Penalties Law.”

On April 21, 2015, the Department of Justice announced a $21,275,000 settlement in Texas. The compensation to several cardiologists was alleged to exceed the fair market value of their services. This is just one example of the aggressive enforcement of regulations related to physician compensation.

Care must be taken to ensure arrangements are proper. The anti-kickback statute and Stark law have safe harbors and exceptions, respectively, that can be used to ensure the compensation and compensation structure are legal.

Bodman can provide guidance on this matter and others. We can help your organization review and develop policies and procedures that meet your needs and provide practical advice. If you would like to discuss these or any other legal issues affecting your organization, please contact the chair of our Health Care Practice Group, Bill Shipman, at (313) 393-7562 or wshipman@bodmanlaw.com.

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