Aligning Physician Compensation
with Growth Strategies and
Governmental Regulations
Mid-Atlantic Physician Recruiter Alliance
Annual Educational Conference
October 2, 2014
Amy Dilcher, Esq.
University of Maryland
Medical System
Emily Wein, Esq.
Ober|Kaler
“Affordable Care Act Reduces Costs for Hospitals, Report Says”
New York Times (9/24/14)
“Interest surges in Medicare bundled-payment initiative”
Modern Healthcare (7/31/14)
“Bundled payments give surgeons a powerful new incentive to reduce
costs”
Modern Healthcare (3/1/14)
“Yale New Haven Health System Teams with Conifer Health Solutions on
Clinical Integration Network”
New York Times (7/31/14)
“Are There Enough Doctors For The Newly Insured?”
Kaiser News (1/3/14)
“Supply won't meet growing demand for primary care”
USA Today (9/25/14)
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Departments of Justice and Health and Human Services announce recordbreaking recoveries resulting from joint efforts to combat health care
Government teams recovered $4.3 billion in FY 2013 and
$19.2 billion over the last five years
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What the News Tells Us
• Dichotomies in physician alignment
• Physicians are the key to care and cost
containment - but there are shortages where
needs are high
• Government is beginning to see the need for
flexibility in regulations – but not fast enough
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Physician Industry Trends
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Continued trend of employing physicians
Accountable care organizations
Payor contracting models
Clinically integrated networks (CINs)
Alternative payment models
Other physician joint ventures
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Legal Considerations and
Physician Alignment
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Self-referral law
Anti-kickback statute
False Claims Act
Tax-exempt laws
Anti-trust laws
State laws (e.g., insurance laws)
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Anti-Kickback Statute
• Prohibits the offer or receipt of any
remuneration in exchange for referrals of
Federal health care program business
• “Two-way” street
• The mere offer or request may constitute a
violation
• Applies to all providers and suppliers
• The key element of a violation is intent
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Anti-Kickback Statute
• Remuneration is anything of value. Examples
include, without limitation:
– Increased compensation
– Free or below market value goods or services, e.g.,
free office space or equipment
– Gifts, e.g., sporting event/entertainment tickets,
dinners
• Federal health care programs include (without
limitation) Medicare, Medicaid, TRICARE,
CHAMPUS, SCHIP
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Anti-Kickback -Intent
• The purpose of the offer or acceptance of
remuneration is relevant in determining a violation
• Appropriate Purposes:
– Improved quality of care
– Improved patient satisfaction
• Inappropriate Purposes:
– Inducement of referrals
– The OIG and most Federal courts adopt the “one purpose
test”: even if there are other legitimate reasons for the
payment/benefit, if just one purpose is to induce referrals,
it is illegal
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Anti-Kickback Statute - Penalties
• Criminal
– Criminal fines up to $25,000 per violation
– Prison Sentences of up to 5 years per violation
• Civil
– Civil penalty up to $50,000 per violation
– Exclusion from participation in Federal health care
programs
– Often regarded as the “economic death penalty”
– Liability under the Federal False Claims Act
– Assessment of up to 3X the kickback
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Stark Law
• Prohibits:
– Physicians from referring Medicare patients for
“designated health services” to entities with which
the physician has a financial relationship – unless the
relationship meets a statutory or regulatory exception
– Billing for services provided pursuant to referral from
physician with a noncompliant relationship
• Applies to physicians and their immediate family
members
• Strict liability – intent does not matter
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Stark Law
• “Designated Health Services” include:
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clinical laboratory services
physical and occupational therapy
outpatient speech language pathology services
radiology and other imaging services
radiation therapy services and supplies
DMEPOS (durable medical equipment, prosthetics, orthotics and
supplies)
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parenteral and enteral nutrients, equipment and supplies
home health services
outpatient prescription drugs
inpatient and outpatient hospital services
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Stark Law
• Referral is a physician’s request, order,
certification, or re-certification of the need for
any designated health service
– Includes a request for a consult with another
physician
– A physician is considered to refer even if he/she does
not direct a patient to a specific provider
• Financial Relationship is a direct or indirect
ownership or investment interest or
compensation arrangement
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Stark Law -Exceptions
• Physicians may only refer to entities with which it
has financial relationships if the relationship
meets all of the elements of an applicable
exception
• All elements of an exception must be met
• Commonly used exceptions include:
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Employment compensation arrangements
Professional service arrangements
Lease arrangements
Nonmonetary compensation
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Stark Law - Exceptions
• Common elements of exceptions
– Written agreement, signed by the parties
– Compensation is fair market value (FMV)
– Arrangement is commercially reasonable, even in
the absence of any referrals between the parties
– Compensation does not take into account the
volume or value of physician’s referrals
– Compensation must be set in advance
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Stark Law -Penalties
• Overpayment/Refund obligations
– Refund all Medicare collections received in connection
with prohibited referrals
• Federal False Claims Act liability
• Program exclusion for knowing violations
– This is where intent does matter
• Civil penalty of $15,000 per service rendered
pursuant to prohibited referral
• Assessment of up to 3X times the amounts billed
as a result of prohibited referrals
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Civil False Claims Act
• Prohibits :
– Filing, or causing to be filed “false or fraudulent”
claims.
– Using false statement to “conceal, avoid or
decrease” a government obligation.
– Failure to return overpayments.
• Intent:
– “Intent to defraud” not required.
– Filing claims with “reckless disregard” of claim’s
truth or falsity is sufficient.
Civil False Claims Act
• Liability:
– 3x Damages (amount of overpayment)
– $5,500 to $11,000 per claim penalties
• State FCAs: May be broader in scope such as:
– Additional services beyond the Stark Law’s
“designated health services”
– Additional payors beyond federal insurers
– Broader definition of who is immediate family
Physician Relationship Compliance
• Construct arrangement within a Stark law
exception and an anti-kickback safe harbor, if
possible
• Employee v. contractor arrangements
• Document the “why?”
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Phyician Employment Models
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Consolidation within larger health systems
Quality-based incentives
Revenue minus expense models
Consider separate physician entity model
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ACO/Commerical Payor
• ACOs
– Regulatory flexibility
– Administrative burden
– Limited success
• Payor Contracting
– Medicare Advantage Plans
– Risk-based contracts
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Clinically Integrated Network
Clinically Integrated Network Legal structure:
New entity owned by Health System Role:
Physician Organization working together to
improve quality,
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Alternate Payment Methods
• Gainsharing
• Bundled Payments
– Single payment for an entire episode of care
– Contain costs and improve quality
– Ability to handle multiple/chronic diseases?
– Hinder innovation?
• Pilot programs
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Other types of
Physician Joint Ventures
• Management Service Models (MSOs)
• Ambulatory Surgery Centers
– Employed physicians and equity ownership?
– Revenue and volume requirements for antikickback compliance
• Sometimes simple contractual arrangements
achieve same goal as creative joint ventures
and more easily demonstrate compliance
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Physician Recruiters and Post
Recruitment Relationships
Recruitment Process
• Engage physicians
• Educate physicians about institute or group
• Attract physicians to area
• Function as a resource as they consider
options, including yours
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Physician Recruiters and Post
Recruitment Relationships
Post Recruitment
• Institutions, large groups may designate
contact person or a “liaison” for physicians
• Function as an informational resource
• Provide a platform for open communication
• Facilitate relationship development
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Physician Recruiters and Post
Recruitment Relationships
• Health care institutions, such as hospitals have a
legitimate interest in maintaining positive relationships
with physicians serving their patients
• Physicians are often “gatekeepers” of health care as they
are often in the best position to evaluate patient need,
patient satisfaction, opportunities for increased quality
of care and improvements in operations
• Regular communication and interaction between
hospitals and physicians can identify and address these
issues
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Physician Recruiters and
Post Recruitment Relationships
• Relationships must be maintained within parameters of
federal Fraud and Abuse Laws
• Stark statute exception for “nonmonetary compensation”
• Nonmonetary compensation may be provided to
physicians, and their immediately family members, if it is:
– Not determined in a manner that accounts for volume or value
of referrals
– Not solicited by the physician or physician’s practice
– Not provided to induce or reward referrals
– Not part of an arrangement that otherwise violates the antikickback statute
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Physician Recruiters and
Post Recruitment Relationships
• Examples include: Lunches, flowers, edible
treats, tickets
– No cash or cash equivalents
• Annual limit per physician (2014 limit = $385)
• All nonmonetary compensation should be
tracked, typically on a “log,” per applicable
policy
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Physician Recruiters and
Post Recruitment Relationships
• If possible, value is divided among physicians
– $200 lunch to physicians and staff in 4 physician practice = $50 logged
to each physician
– $300 dinner for physician and spouse = $300 logged to the physician
• Indivisible value is allocated to each physician
– $150 goodie basket to 3 physician practice = $150 allocated to each
physician
– $75 flower arrangement given to 4 physician practice = $75 logged to
each physician
– If an item with indivisible value is given to a specific physician within a
practice, then the total value is only logged to the recipient physician
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Physician Recruiters and
Post Recruitment Relationships
• DO – Express appreciation for their high quality
services provided to hospital patients
• DO- Discuss opportunities for service line
development and community promotion
• DO – Ask why physicians may refer patients to
other hospitals
• DON’T - Offer or suggest an offer of any value or
benefit in exchange for referrals to an affiliated
hospital or provider
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Physician Recruiters and
Post Recruitment Relationships
• DO – Discuss offering community outreach
activities that benefit the hospital’s service area
• DO- Discuss opportunities for increased patient
satisfaction
• DO- Discuss physicians’ ideas for increased
efficiencies
• DON’T – Limit interactions to highest referring
physicians or physicians from whom hospital wants
referrals
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Questions?
Amy J. Dilcher, Esq.
University of Maryland
Medical System
adilcher@umm.edu
Emily H. Wein, Esq.
Ober|Kaler
ehwein@ober.com