Compliance Risk Area: Arrangements With Referral Sources

Key Points:

• This risk area remains the number one enforcement priority for DOJ and OIG
• Maintaining an Arrangements Database
• Process for reviewing compliance
• Tips on mitigating risks

Improper arrangements with referral sources represent the vast majority of enforcement actions by the Health and Human Services Office of Inspector General (OIG) and Department of Justice (DOJ) under the Anti-Kickback Statute (AKS), Stark Law, and False Claims Act (FCA). Those found in violation can face heavy penalties, including civil and criminal prosecutions, fines, Corporate Integrity Agreements, and possible exclusion from participation in federally funded healthcare programs.  The AKS prohibits the exchange of anything of value in return for referrals or business involving items or services reimbursable by federal healthcare programs, such as Medicare or Medicaid. In short, it prohibits financial incentives that could corrupt medical judgment or drive overutilization. The government considers all claims arising from such arrangements to be false and fraudulent in violation of the FCA.

Annually, there are approximately 1,500 enforcement actions taken involving AKS and FCA violations, along with over 2,000 parties excluded from participation in Medicare and Medicaid. To manage and mitigate risks of violations, the OIG calls for establishing an Arrangements Database as a centralized system to track, manage, and monitor financial relationships and agreements with referral sources and other third parties, such as physicians, vendors, contractors, and entities involved in federal healthcare programs. This includes documenting all contracts and agreements with potential referral sources, such as parties involved, effective and expiration dates, payment terms and methodology, and scope of services. The database can also be used to monitor the approval process, legal and compliance reviews, alerts for expirations or renewals, and maintain evidence of fair market value and commercially reasonable determinations. Reviewing arrangements for compliance should include the following four areas: (1) reviewing the process that justifies the need; (2) examining the process by which the selection is made for the work; (3) ensuring the terms and conditions address fair market value and are commercially reasonable; and (4) verifying that the work is being performed according to the terms of the agreement. Other tips on mitigating risks include the following:

1. Implement written policies and procedures that explicitly address Anti-Kickback Statute risks.
2. Conduct regular compliance training for those involved in developing arrangements.
3. Ensure ongoing monitoring of arrangements.
4. Verify that arrangements meet applicable safe harbor rules (e.g., personal services, employment, space rental, equipment rental).
5. Ensure fair market value and commercial reasonableness for arrangements are evidenced.
6. Track and audit payments to ensure performance with contract terms.
7. Keep detailed records supporting decisions related to hiring, contracting, and compensation.
8. Create and maintain an Arrangement Database.
9. Promptly and thoroughly investigate concerns related to an arrangement.
10. Periodically audit contracts, billing, and referral practices.
11. Consider hiring external expert consultants to review high-risk arrangements.
12. Self-disclose to the OIG if a potential violation is identified.

Interested in learning more?  Richard Kusserow is available by email at [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.