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Physician Arrangements

Richard Kusserow

Anti-Kickback Statute Penalties and Violations: Medical Director and Advisory Agreements

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It is important as part of ongoing auditing and monitoring to understand the importance of and how to review agreements with physicians in a position to influence the referral of business.   The OIG has been employing the federal Anti-Kickback Statute (“AKS”) (42 U.S.C. 1320a-7b(b)) to various types of arrangements involving physicians due to an enhanced opportunity for abuse in this area. Read on to learn more about Anti-Kickback Statue penalties. 

It has become very common now for a qui tam investigation be predicated upon allegations of violations of the AKS.  When our firm performs reviews of hospital arrangements with physicians on behalf of law firms, we focus on 15 key standards and tests that they in turn can use in developing stronger contracts and supporting documents for their clients.  Some of these standards can be quite complex in analyzing, however there are some simple tests and tips offered herewith that can be done easily by Healthcare Compliance Officers.

Most hospitals engage their physicians to perform administrative services as Independent Contractors in lieu of an employee relationship.  Generally, the Independent Contractor relationship may raise suspicion because of inherent quid pro quo characteristics.

In other words, physicians serving as Independent Contractors must provide something of value, which sometimes is suspected to be a flow of referrals rather than personal services. Furthermore, Independent Contractors, by definition, are not subject to their employer’s control as to how they perform their functions, particularly the amount of time they must commit to their duties.

Therefore, physician Independent Contractors could invite outside scrutiny if they fail to justify their compensation in relation to the hours of service that they perform.  As a result, many hospitals now recast their Agreements with physicians performing administrative services as Part-time, Exempt, or Contract Employees.  The agreements should therefore make it clear as to the status of the physician as either as a bone fide employee or contract employee.

All contracts had specified dates marking the beginning and end of the contract period, as well as the date of execution.  The term of the arrangement must be for at least one year and, if terminated during that time, the parties may not enter into the same or substantially the same arrangement within the first year of the original term of the agreement.

The government’s concern is that loose engagement terms could be used to renegotiate terms based upon levels of referrals. It is advisable to have one year term agreements that can be terminated only for cause.  In this way, there is no suggestion that one party or the other can use the right to terminate without cause as leverage to secure better terms as result of referral patterns.

The Stark provisions are quite clear about properly executed personal service agreements.  It is important that both the physician and the authorized party on behalf of the hospital sign and date the agreement.  It is important to verify all physician agreements are properly dated and executed.

All of the contractor agreements should have a clause entitled “Entire Agreement”.  It makes clear that it is the entire agreement “with respect to the subject matter hereof…” …

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