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OIG Fraud Alert on Physician Compensation — Why Is No One Listening?

A few weeks ago, the OIG published another one of its fraud alerts.  This one was entitled, “Physician Compensation Arrangements May Result in Significant Liability.”

Everyone knows (don’t they?) that business arrangements in healthcare have to meet several legal requirements, including: (1) it cannot be based on the value or volume of referrals, (2) it must be at arms’ length, and (3) it must be commercially reasonable.  When a healthcare provider enters into a transaction that violates any of these three requirements, he may have violated the anti-kickback statute or physician self-referral/Stark law or both, and any claim arising from the transaction that is submitted to the federal government for payment may be a false claim.  Healthcare lawyers have long been warning their clients to be cautious about how they pay (and recruit) physician employees and contractors in order to avoid violations of the kickback, self-referral, and false claims laws. Violations carry stiff penalties and in some cases criminal sanctions.

There is nothing new in this recent Fraud Alert.  Many similar fraud alerts and OIG advisory opinions and actual court cases have passed on the same message.  And there is nothing surprising other than that the facts described in this Fraud Alert so obviously violate these healthcare laws that you have to ask, why is no one listening?

I have a three explanations:

  • The false claims act was passed during the Civil War and was aimed at stopping corruption in how defense contractors were paid.  The law made sense.  There was a direct relationship between the defense contractor and the government dollars received.  However, the false claims act makes no sense in healthcare — treating a patient is so separated from payment; the provider at the time of care may not know who is paying — government, commercial, the patient, or no one.
  • The healthcare laws are so contrary to the economic rules that apply to other businesses and so counter-intuitive as to make them offensively ridiculous and begging to be ignored (which they are).
  • As we move to a pay for performance, quality-based healthcare reimbursement system, these laws become even more irrelevant.  Case in point — Accountable Care Organizations — a critical foundation for healthcare reform under the Accountable Care Act.  ACOs could not operate unless waivers to these healthcare laws were implemented.  Every healthcare provider is not in an ACO, but many are developing clinically integrated networks and other arrangements to oversee quality and utilization in order to compete more effectively with large healthcare systems and negotiate with payors in keeping with the goals of healthcare reform.  They are forced to act as if the waivers applied to them also.  In fact many consultants advise that the waivers DO apply to non-ACO networks.

It is time for a thoughtful review (and repeal) of these antiquated and economically debilitating laws in how they apply to healthcare providers.  It is time to stop calling business sensible healthcare transactions fraudulent and punishing the participants.

These laws allow regulators to be lazy and stupid. Anyone can enforce laws based an strict liability or ones that have lines so faint that crossing them is unavoidable.

Seriously, who cares if someone pays a fee for referring a patient for care?  Liability should be based on the quality and necessity of the care.  Providing care not needed or charging for care not given — those actions should be punished.  But that’s harder for regulators, so we continue to vilify healthcare providers and impose burdens on them that are far tougher than the benefits derived.

  1. July 11, 2015 at 8:58 am

    More to the point of charging providers with imaginary fraud, go to the OIG enforcement website: https://oig.hhs.gov/fraud/enforcement/criminal/index.asp

    Just because someone got paid a referral fee doesn’t make it a fraudulent scheme — yes, it’s illegal, but is it bad healthcare?

    Look at all the nonprofit and university hospitals which have had to pay hefty fines. Does that make sense? Let’s just call it what it is — a tax that is applied unfairly and unpredictably.

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