Compliance Update

OIG Says It Is Ready to Target Physicians in Kickback Cases

OIG’s new fraud alert targets doctors, saying both parties in fraud/kickback schemes will be charged

Office of Inspector General, U.S. Department of Health and Human Services.

PHYSICIANS WHO PARTICIPATE IN schemes that violate anti-kickback and fraud statutes will be at greater risk of prosecution by federal healthcare officials. This development comes following the June 9 release by the OIG of “Fraud Alert: Physician Compensation Arrangements May Result in Significant Liability.”

This new fraud alert signals a shift by the OIG to charge both parties in any fraud or kickback scheme, according to the law firm King & Spalding in Atlanta. To give this fraud alert more teeth, it was disclosed by Modern Healthcarethat the Office of Inspector General (OIG) at the federal Department of Health and Human Services is hiring additional attorneys to combat healthcare fraud.

Pathologists and lab administrators across the nation will be watching to see if the OIG does, in fact, begin to investigate and bring charges with more frequency and vigor against physicians who accept kickbacks and other forms of inducements from clinical laboratory companies.

Doctors Now Have More Risk

It has been pointed out regularly over the past two decades that, if federal officials do not regularly bring cases against physicians who accept kickbacks from laboratories willing to push compliance with federal and state laws, then physicians have no reason to fear consequences from accepting the various forms of kickbacks and inducements offered by lab companies willing to bend the rules in their favor.

The Anti-Kickback Statute allows prosecutors to file criminal charges against both parties in a kickback arrangement, King & Spalding explained. In general, however, the OIG has not pursued criminal charges against physicians receiving kickbacks, K&S said. Instead, investigators have focused on the party paying the kickback, the law firm added.

Prosecutors Will Target Docs

The fraud alert and recent actions in which federal prosecutors brought criminal charges against doctors receiving kickback payments demonstrates a shift in that stance. There was at least one recent case where physicians accepting kickbacks from laboratory companies have been investigated and charged under federal law.

For physicians, the fraud alert sends a strong message, stated Alston + Bird, a law firm in Washington, D.C., that does a significant amount of work for clinical laboratories. The firm’s attorneys wrote that the alert underscores OIG’s focus on doctors who have questionable compensation arrangements with provider organizations. These include hospitals, nursing homes, dialysis clinics, and similar providers, Alston + Bird said. The law firm did not mention clinical laboratories or pathology groups specifically.

“The OIG is increasingly scrutinizing such arrangements to ensure that they reflect fair market value for bona fide services and otherwise comply with the federal anti-kickback statute (AKS),”

Alston + Bird said. “Indeed, the OIG revealed in the fraud alert that it recently reached settlements with 12 physicians who received compensation under medical directorship agreements that did not reflect fair market value for the services to be performed,” the law firm commented.

“In some instances, the institutional provider also paid the salaries of the physicians’ front office staff, which the OIG found to constitute improper remuneration,” the law firm added.

Bio-Diagnostics Lab Case

In an investigation into kickbacks given to physicians, federal prosecutors working on the case involving Biodiagnostics Laboratory Services, LLC, in Parsippany, New Jersey, filed charges against 25 doctors, 12 of whom have been sentenced. Some of the doctors got probation but some got prison terms.

The Bergen Record reported that 38 defendants have been charged, including “25 doctors from New Jersey, New York and Connecticut, in what is believed to be one of the largest- if not the largest-laboratory bribery prosecutions in the United States, both in terms of money and the number of physicians caught with their hands out.”

Another recent case of fraud involving medical laboratories is still under active investigation. Earlier this year, Health Diagnostic Laboratories of Richmond, Virginia, and Singulex of Alameda, California, settled a federal case involving multiple whistleblowers. Both companies denied the allegations in the qui tam case, while agreeing to pay restitution under the settlement agreements. (See TDR, April 20, 2015.)

When the settlement agreements were announced, officials at the Department of Justice revealed the existence of additional legal cases against executives of HDL, a lab marketing company, and another laboratory. Legal experts believe that the U.S. attorneys handling these cases are conti uing to investigate these cases and that, along with lab executives, physicians who accepted payments considered to be kickbacks may also face federal charges.

OIG Signals its Intent To Be Tougher on Doctors

KICKBACKS AND ILLEGAL INDUCEMENTS clinical laboratory companies paid to physicians have been prominent elements in two legal cases pursued by the Department of Justice in recent years. Some legal experts believe these two cases were a factor in the decision by the Office of the Inspector General of the Department of Health and Human Services to release a new fraud alert on June 9.

Titled, “Fraud Alert: Physician Compensation Arrangements May Result in Significant Liability,” the document describes the following as a potential kickback:

Physicians who enter into compensation arrangements such as medical directorships must ensure that those arrangements reflect fair market value for bona fide services the physicians actually provide. Although many compensation arrangements are legitimate, a compensation arrangement may violate the anti-kickback statute if even one purpose of the arrangement is to compensate a physician for his or her past or future referrals of federal health care program business. OIG encourages physicians to carefully consider the terms and conditions of medical directorships and other compensation arrangements before entering into them.

It is noteworthy that, along with issuing this OIG fraud alert, federal officials called attention to the fact that the OIG was hiring additional lawyers to combat healthcare fraud. Not in two decades have federal agencies issued such clear warnings for physicians to stear clear of arrangements that might be viewed as involving kickbacks or illegal inducements.

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