The OIG recently issued Advisory Opinion 13-15 disapproving of a part-time physician services agreement between an anesthesiologist group and a psychiatry group for the provision of electroconvulsive therapy (“ECT”) procedures at a hospital (the “Proposed Arrangement”).1 The OIG stated that because of an opportunity to generate a fee as a result of a referral, the Proposed Arrangement could cause prohibited remuneration under the Anti-Kickback Statute (“AKS”), depending on the parties’ intentions. Hospitals and physician groups should be cognizant of the AKS risk areas when engaging in part-time agreements for physician services and should consider the potential impact of exclusivity arrangements.
Relevant Facts
The Parties. An anesthesia services physician group (“Requestor”) contracted with a Hospital (“Hospital”) to exclusively provide anesthesia services. In 2010, a psychiatric physician group (“Psychiatry Group”) relocated its practice to the Hospital. The Psychiatry Group’s practice included ECT procedures.
Exclusive Contract. Before the Psychiatry Group relocated its practice to the Hospital, the Requestor provided all of the anesthesia for ECT procedures performed at the Hospital. After the Psychiatry Group’s relocation, the Hospital negotiated a “carve-out” with the Requestor for one of the Psychiatry Group physicians (“Physician”) to be able to provide anesthesia services to ECT patients independent of any relationship with the Requestor.
Ultimately, the contract between the Hospital and the Requestor allowed the Physician to provide anesthesia services to ECT patients in the Hospital’s ECT program. Further, the contract required the Requestor to provide coverage for the Physician upon prior notice as agreed to by the Requestor and the Physician.
The contract went on to state that in the event the Psychiatry Group or the Hospital determined that an additional anesthesiologist was needed to provide ECT, the Requestor must negotiate in good faith with the Psychiatry Group to contract for those services. The contract provided that if the Requestor and the Psychiatry Group were unsuccessful in negotiating the terms of an agreement, then the Psychiatry Group could contract with an additional anesthesiologist for ECT services as long as the last offer from the Psychiatry Group was at fair market value, as reasonably determined by the Hospital.
Proposed Arrangement. The Psychiatry Group later informed the Requestor that an additional part-time ECT anesthesiologist was needed. Under the Proposed Arrangement, the Requestor and the Psychiatry Group would enter into a contract where the Requestor would fill the need for the part-time physician. The Requestor would provide the needed anesthesia services and reassign its right to bill for the services to the Psychiatry Group. In turn, the Psychiatry Group would pay the Requestor a fixed per diem rate for the Requestor’s services. The Requestor asserted that the fixed rate was below fair market value and below what it would receive if it billed for the services directly. The Psychiatry Group would keep the difference between the amount collected and the per diem rate.
Anti-Kickback Statute Analysis
The Statute and Safe Harbor. The AKS makes it a criminal offense to knowingly and willfully offer or receive remuneration to induce or reward referrals of items or services reimbursable by a Federal health care program. According to the OIG, if one purpose of the remuneration is to obtain money for the referral of services or to induce further referrals, the AKS has been violated. The Safe Harbor for Personal Services and Management Contracts, which protects certain payments under a written contract made by a principal to an agent as compensation for the agent’s services, potentially applies to the Proposed Arrangement.
OIG Analysis. The OIG stated that the opportunity to generate a fee could constitute illegal remuneration under the AKS, even if no payment is made for a referral. Under the Proposed Arrangement, the Requestor would provide the Psychiatry Group with an opportunity to generate a fee equal to the difference between the amounts billed to government / private payors and the contract fee. The OIG stated there was significant risk that this remuneration would be in return for the Psychiatry Group’s anesthesia referrals to the Requestor.
The OIG determined that the flat fee amounts the Psychiatry Group would pay the Requestor under the proposed arrangement would not qualify for protection under the Safe Harbor. In short, the OIG stated that the Safe Harbor would only apply to the contract payment from the Psychiatry Group to the Requestor. It would not apply to the remuneration from the Requestor to the Psychiatry Group, which in this case would be the opportunity to generate a fee. Further, this Safe Harbor requires fair market value payments, which the Requestor asserts the Proposed Arrangement does not have.
Impact of Exclusive Agreement. The OIG also addressed the exclusive contract between the Hospital and the Requestor being the vehicle for this Proposed Arrangement. The OIG expressed concern that the exclusive contract language might be a reward to the Psychiatry Group for referrals, that the Hospital may be leveraging its anesthesia services to negotiate the carve-out and that the Requestor agreed to the carve-out in exchange for access to the Hospital’s referrals.
OIG Conclusion. The OIG determined there were no safeguards in the Proposed Arrangement that would minimize the AKS risk; therefore, the OIG determined that the Proposed Arrangement would potentially pose more than a minimal risk of fraud and abuse under the AKS.
Practical Takeaways
Hospitals and physician groups should be aware of the risks associated with carve-outs to exclusive arrangements as well as engaging in part-time independent contractor physician agreements that relate to such arrangements. Some questions to consider are:
- Is an exclusive arrangement for legitimate services in furtherance of quality care and the Hospital’s mission?
- Is a carve-out to an exclusive arrangement reasonable and necessary in furtherance of quality and clinical performance?
- Does such a carve-out result in an unnecessary sub-contracting arrangement?
- Is one entity being placed in a position to leverage its referrals?
- Are arrangements being paid at fair market value as determined by a qualified entity?
If you have any questions or would like additional information about this topic, please contact Gregg M. Wallander at 317.977.1431 or gwally@hallrender.com, Alyssa C. James at 317.429.3640 or ajames@hallrender.com or your regular Hall Render attorney.
Please visit the Hall Render Blog at http://blogs.hallrender.com/ for more information on topics related to health care law.
