The U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) released a fraud alert on physician compensation arrangements in June 2015. This, combined with an onslaught of investigations and settlements regarding the same topic, has resulted in the need for hospitals to review and monitor all of their physician arrangements to ensure compliance with the Stark Law and anti-kickback statute.

This fraud alert targets physicians and directs that all compensation arrangements reflect fair-market value and payment for bona fide services that have been provided. Furthermore, the alert notes that if any purpose of the arrangement is to compensate a physician for past or future referrals, the potential exists for violation of the anti-kickback statute, which could result in possible criminal, civil, and administrative sanctions, including but not limited to exclusion from the federal healthcare programs and potential draconian penalties via the False Claims Act. 

Today, most organizations know about the risk associated with these types of arrangements. However, organizations may not know the right questions to ask regarding physician and focus arrangements. Below are some questions for hospitals, physicians, and their business partners to ask when reviewing their agreements for compliance:

  • Is the work described in the contract bona fide, and is it currently being performed?
  • Is the work being performed being paid for at an acceptable level of fair-market value?
  • When was the last time a fair-market value assessment was performed?
  • What is the process to validate that all work described in the agreement has been documented and can be produced if there is an audit?
  • Are referrals mentioned anywhere in the agreement?
  • What other contracts and relationships exist between the parties?
  • Are all contracts centrally located in one database so the organization can interactively monitor and manage them?
  • Have all of high-risk contracts been subject to legal review by experienced hospital counsel?
  • Has a business review been performed to validate the organizational need for the services being performed?
  • Has the contracted work that has been performed been evaluated? If any deficiencies were identified during the evaluation process, have corrective actions been taken?
  • If different duties are being performed than identified in the contract, should they be paid at the same or different rates?
  • For physician and provider employment contracts, are there any incentive payments associated with internal referrals, volume of business, or department or service line profitability?
  • Who is reviewing and approving the numbers of hours worked for payment?
  • Have all parties in the contract been reviewed against applicable lists of excluded individuals and entities? How frequently is this review performed?
  • Who has approved (signed) the agreement? Is this consistent with the organization’s policies?
  • Is a process in place to mandate that all contracts be stored in the contract database?
  • Has an audit determined if any payments are being made that are not associated with an active contract?
  • Is the contract signed by both parties?
  • Is the contract current, or has it expired?
  • Has the required insurance coverage that the parties need to maintain been verified?
  • If applicable, is there a valid business associate agreement as required by HIPAA? In many instances of professional service agreements, this won’t be necessary because the services are covered under the HIPAA treatment exception, but it is still a valid question to ask.

With all of the changes occurring and being proposed in our healthcare delivery system, including issues of coordinated care focusing on population-based medicine, more arrangements and formalized relationships between physicians and hospitals will continue in the future.

Just as organizations monitor and audit their high-risk billing claims as a component of their proactive compliance program, they should extend the audit-and-monitor function to physician agreements and focus arrangements.

About the Author

A veteran in healthcare compliance (since 1997), Bret Bissey has served as senior vice president and chief ethics compliance officer at UMDNJ in Northern New Jersey. The author of the Compliance Officer’s Handbook, he has been a thought leader and popular speaker at industry conferences and meetings for many years. Bissey has more than 30 years of diversified healthcare management, operations, consulting, and compliance experience.

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