On June 9, 2015, the OIG issued a new Fraud Alert, cautioning physicians who enter into compensation arrangements such as medical directorships to ensure that the arrangements reflect fair market value for bona fide services that the physicians actually provide. The OIG reiterated that a compensation arrangement could violate the Anti-kickback Statute if even one purpose of the arrangement was to compensate a physician for his or her past or future referrals of Federal health care program business, including Medicare and Medicaid.

The OIG reported that it recently entered into settlements with twelve physicians who had entered into questionable medical directorship and office staff arrangements, in which the OIG alleged the compensation paid to the physicians constituted illegal remuneration under the Anti-Kickback Statute. The OIG alleged the compensation paid to the physicians was illegal remuneration because: a) it took into account the volume or value of referrals by the physicians of Federal health care program business; b) it did not reflect fair market value for the services provided; and c) in some cases, the services were not actually provided by the physicians. Additionally, the OIG alleged that the payment of salaries of the physicians’ front office staff by the contracting entity relieved the physicians of a financial burden they would otherwise have paid and, thus, constituted illegal remuneration to the physicians. The OIG further determined the physicians were an integral part of the scheme and, therefore, subject to liability under the Civil Monetary Penalties Law.

The OIG reiterated that such arrangements that would be considered fraudulent activity could subject the participants to possible criminal, civil, and administrative sanctions. For more information on OIG guidance regarding physician relationships, the OIG referenced its “Compliance Program Guidance for Individual and Small Group Physician Practices” (available at http://oig.hhs.gov/authorities/docs/physician.pdf) and its “Roadmap for New Physicians: Avoiding Medicare and Medicaid Fraud and Abuse” (available at http://oig.hhs.gov/compliance/physician-education/roadmap_web_version.pdf).

Given the OIG’s focus on these types of physician compensation arrangements, included medical directorships, it is important that physicians and entities to these arrangements review them carefully. The parties who have entered or are contemplating entering such arrangements and agreements should consider seeking legal counsel for advice on whether the arrangement and agreement complies with all applicable federal and state laws.