Arrangements With Referral Sources Remains The Top Compliance Risk Area

Eleven Areas of Risk

For healthcare providers, the highest area of enforcement by the Department of Justice (DOJ), Office of Inspector General (OIG), and the Centers for Medicare & Medicaid Services (CMS) involves corrupt arrangements with referral sources. The vast majority of settlements with the DOJ and OIG arise from arrangements with referral sources that violate the Anti-Kickback Statute (AKS) or Stark Law, both of which are strict and unforgiving. Under Stark Law, intent does not matter. Under the AKS, a single purpose of inducing referrals is sufficient to create liability. Violations can trigger False Claims Act exposure, Civil Monetary Penalties, exclusion from federal healthcare programs, and criminal prosecution. One defective contract can contaminate years of claims. Every claim arising from that tainted relationship may be considered false with liability exposure often reaching millions, and in some cases tens of millions of dollars. The look back periods can extend 6–10 years. Typical problem areas include payment that is not tied to actual services; time logs that are missing or inflated; compensation that is tied (directly or indirectly) to volume or value of referrals; arrangements that are not commercially reasonable absent referrals; and expired contracts that continue operating. The following are common high-risk arrangements:

1. Medical Director Agreements. These are among the most common types of arrangements that can result in enforcement action. Risks arise when the arrangements are poorly supported in documentation; provide for unnecessary services; payments exceed fair market value (FMV); time logs are missing or inflated; and services are indistinguishable from normal physician duties. Common failures are flat monthly fees with little or no work performed, vague job descriptions, and multiple “medical director” roles with overlapping duties. These are especially risky if tied to market share growth.
2. Marketing, Lead Generation, and Patient Steering Arrangements. Payments tied, explicitly or implicitly, to referral volume implicate the AKS. Digital marketing and call-center arrangements are heavily scrutinized by regulatory agencies, with whistleblower complaints service as the overwhelming factor leading to investigations.
3. Joint Ventures and Ownership Structures with Referral Sources. High risks exist where profit distributions are disguised, risk is not shared equally, and passive investors generate referrals.  Each of these factors can improperly influence the flow of business.
4. Physician Compensation Tied to Productivity or Quality.  Arrangements that are based on the volume or value of referrals, relative value unit stacking, bonus miscalculations, or quality incentives that track referral growth will implicate the AKS.
5. Management Services Agreements (MSOs). Agreements based on percentage-of-revenue fees, hidden control over clinical decision-making, or improper profit shifting may result in enforcement action. Red flags include fees not tied to actual services and overlapping services with employed staff.
6. Space, Equipment, and Timeshare Leases. Any arrangement involving rentals and leases with referral sources that are below FMV rates can implicate both the AKS and Stark Law, as favored pricing may function as inducements or rewards for referral of business.
7. On-Call Coverage and Call Pay. Arrangements where compensation exceeds the actual burden of coverage, or where payment is made, despite coverage not being provided, present significant AKS risk.
8. Professional Services Agreements (Non-Medical Director). Arrangements for consulting, advisory, and training agreements create risk when there is little in the way of deliverables or where compensation lacks FMV support.  These arrangements are viewed as another way to reward physicians for making referrals.
9. Value-Based Care and Shared Savings Arrangements.  This is a risk area that is lowered when it meets regulatory safe harbor standards under the AKS. Risk increases with poor documentation, improper attribution, or failure to satisfy all the safe harbor standard requirements.
10. Recruitment, Relocation, and Retention Assistance. There are well-defined regulatory exceptions that reduce the risk of violating the law. Risk arises when forgiveness is tied to referrals, or practice location requirements are violated.
11. Incidental Non-Cash Benefits. There are AKS and Stark Law risks when an organization provides meals, education, and gifts.  If nominal, there is little risk, but only if properly tracked and limited.

An effective risk-management strategy is engaging an independent third-party expert consulting firm to conduct the risk assessment and identify remedial actions to address risky arrangements.

Richard Kusserow, a former Inspector General, worked directly with Congress on amendments to the Anti-Kickback Statute and the development of the Stark Law, and had responsibility for AKS enforcement at HHS. For more information on this topic, contact [email protected].

About the Author

Richard P. Kusserow established Strategic Management Services, LLC, after retiring from being the DHHS Inspector General, and has assisted over 3,000 health care organizations and entities in developing, implementing and assessing compliance programs.