Practice Management Alert

Tips for avoiding fines, even when a gift seems harmless.

Could a vendor’s holiday present land you in hot water? Read on to refresh your memory on the basics of the federal anti-kickback statute, and learn how to limit your practice’s risk.

Learn the Basics

Originally passed in 1972, the Anti-Kickback Statute (AKS) aims to protect Medicare and other federally-funded health care programs from fraud and abuse. It “is a criminal statute that prohibits the exchange (or offer to exchange), of anything of value, in an effort to induce (or reward) the referral of federal health care program business,” explains this brief from the American Health Lawyers Association (https://www.healthlawyers.org/hlresources/Health Law Wiki/Anti-Kickback Statute.aspx).

For example, if the owner of a lab your practices utilizes offers your physicians “incentives” for referring all of your patients to him, that is considered a kickback. In this kind of situation, cash rewards, gifts, vacations, and even discounted services or supplies are considered kickbacks. Money does not have to change hands to implicate AKS. It can be anything of value.

Beware: The biggest culprits trying to woo physicians are pharmaceutical companies, labs, hospitals, nursing homes, home health groups, portable x-ray companies, and manufacturers of devices and supplies.

Penalties for engaging in kickback fraud vary depending on the level of severity, but can include fines, incarceration, and exclusion from the Medicare and Medicaid programs.

Here are some examples of business arrangements involving physicians that can fall under anti-kickback and Stark regulations, according to Brenda Laigaie of Wade, Goldstein, Landau & Abruzzo, who presented at the American Academy of Ophthalmology in 2016. These arrangements are not automatically illegal, but must be structured to fall within AKS safe harbors and Stark exceptions (more on those later) to reduce risk:

• Physician ownership or partial ownership of ambulatory surgery centers (ASCs), clinical labs, and DME suppliers.
• Physician employment arrangements outside the practice.
• Independent contractor arrangements.
• Leases and rentals of equipment, space.

Finding Exceptions: AKS Safe Harbors

Just as the Stark law against self-referral has exceptions that enable business arrangements that would otherwise violate the law, so does the Anti-Kickback Statute. In the AKS context, they’re called “safe harbors.” When practices are evaluating a potential business arrangement involving one of their physicians, the attorney involved typically does an analysis that takes into account both the relevant Stark exceptions and the AKS safe harbors.

According to Laigaie, these are the AKS safe harbors that health care attorneys most often apply when structuring business arrangements involving physicians:

• Investment interests in group practices or ASCs.
• Space and equipment rental.
• Personal services and management contracts.
• Sale of practice.
• Referral arrangements for specialty services.

Clearing Up Fair Market Value (FMV)

Fair market value means commercially reasonable compensation for bona fide professional services, but the FMV concept can become very complicated when physicians are involved.

As diagnosticians, physicians are “gatekeepers.” A doctor’s work—by its very nature—refers patients to other health care services such as clinical labs, hospitals, and imaging services. A physician’s referrals mean revenue for those entities, and the value of those referrals muddies up the meaning of FMV for everyone involved—physicians, health care entities, and any regulators who may be looking on.

There’s no case law that establishes what FMV means for physicians, and the regulators don’t provide concrete guidance. However, your physicians can take practical steps to show that their work for outside entities is compensated for being just that—the work that they do. They should not enter into financial arrangements that compensate them for the value of the referrals they generate for the entity they’re doing the work for.

But what is fair market value? How do you determine FMV when making sure a financial arrangement one of your physicians is considering complies with the anti-kickback and Stark laws? Here are some ways to stay on the right side of FMV:

1. Understand that a physician’s compensation for a position includes not just salary, but the entire compensation package—which could include malpractice insurance and other perks. Is your physician’s total compensation package at fair market value?

2. Avoid any kind of percentage compensation related to the volume or value of your referrals. The legal jargon for such arrangements is “per click.”

3. Protect your physician and the entity they’re working for by drawing up a written agreement that you and the entity review annually and revise if necessary. The Kosenske case in 2009 (http://www.foxrothschild.com/publications/the-kosenske-case-and-stark-an-important-lesson-for-physician-hospital-arrangements/) shows that a written agreement may protect a physician in court, observes attorney Wayne Miller in an AudioEducator presentation. The written agreement may mention how it calculates FMV for the position, specify expected hours of service, require time records or reports, and specify an hourly rate.

4. Encourage your physicians to seek attorney advice about the compensation arrangements they enter into.

5. Warn your physicians not to accept compensation beyond their formal agreements, such as bonuses, side payments, or free items or services.  More-than-once-a-year revisions to your agreement will look shady to any regulator who goes poking around in the contract.

6. Compare your physician’s compensation to other sources for FMV. You might turn to compensation surveys from groups like The Medical Group Management Association, The American Medical Association, or the American Medical Group Association.

7. Know that special skills or situations could put a physician above the FMV of doctors in the surveys. For example: Does your physician have unique qualifications or experience? Will they deal with difficult cases that most of their peers can’t handle? Are they serving in a rural or remote area?

8. Suggest that your physicians give all their compensation arrangement the “jaw drop test,” Miller suggests. If the details or the compensation would make a colleague’s jaw drop with disbelief at the great deal they’ve got, it’s likely not FMV.

Do Your Practice’s Marketing Programs Run Afoul of AKS and Stark?

In any other business, gifts to customers, prospects, and referral sources are simply a marketing tactic—especially during the winter holiday season. In health care, however, this practice can land you in hot water with the feds.

Depending on the value and circumstances of your gift, it can garner a substantial fine as a violation of the Anti-Kickback Statute (AKS). Even if you have the very best of intentions, gifts suggest a financial obligation.

“Gifts from health care providers to referral sources, patients, vendors, and colleagues can create unintentional sticky situations,” cautions attorney Patricia Hofstra with Duane Morris in Chicago, in an interview with TCI’s Medicare Compliance & Reimbursement. “Many businesses give gifts during the holiday season as a token of friendship and appreciation, but for health care providers, the situation is complicated by the Stark laws and the anti-kickback fraud and abuse prohibitions.”

Since 2000, the government had determined that gifts with a retail value equaling $10 per gift or $50 annually per patient were acceptable. With the need to address inflation in late 2016, the limits were raised and are now $15 per gift and $75 annually. (See the Federal Register: https://www.federalregister.gov/documents/2016/12/07/2016-28293/medicare-and-state-health-care-programs-fraud-and-abuse-revisions-to-the-office-of-inspector). This adjustment for inflation came along around the same time federal regulators adjusted civil monetary penalties for inflation.