Anesthesia Coding Alert

Staying up-to-date with anti-kickback laws will help keep you in the clear.

The OIG (Office of Inspector General) issued a Fraud Alert on compensation for medical directorships on June 9, 2015. Read on for the scoop on how your anesthesiologists can avoid potential kickback penalties and stay off the OIG’s radar. 

Know When the Waters Could Get Murky 

Many anesthesiologists serve as the paid medical director of their operating suite or ambulatory surgery center (ASC). The tricky part involving Federal anti-kickback statutes comes into play when the anesthesiologists refer patients to their hospitals (such as for preoperative tests) and they receive medical director compensation. 

As the OIG has stated in numerous Advisory Opinions, “The anti-kickback statute makes it a criminal offense knowingly and willfully to offer, pay, solicit, or receive any remuneration to induce or reward referrals of items or services reimbursable by a Federal health care program.… Where remuneration is paid purposefully to induce or reward referrals of items or services payable by a Federal health care program, the anti-kickback statute is violated…. For purposes of the anti-kickback statute, ‘remuneration’ includes the transfer of anything of value, directly or indirectly, overtly or covertly, in cash or in kind. The statute has been interpreted to cover any arrangement where one purpose of the remuneration was to obtain money for the referral of services or to induce further referrals.” 

“Compensation arrangements including payment for medical directorships can be perfectly legitimate—or they can violate the statute if any part of their purpose is to reward a physician for referring Medicare or other federally-insured patients,” states Tony Mira, founder of Anesthesia Business Consultants in Jackson, Mi. “As we know, anesthesiologists traditionally do not refer patients to the hospital or ASC; the facility refers patients to the anesthesiologists. If the group also performs pain management services, however, the pain specialists may be referring those patients to the facility, and any payments denominated ‘medical director fees’ could be seen, potentially, as intended to induce referrals of pain patients.  

“Similarly,” Mira adds, “anesthesiologists who order pre-operative tests may be ‘referring’ for those services. Although past OIG enforcement activity has focused heavily on hospital and other institutional provider liability, the new Fraud Alert places physicians on notice that their medical director arrangements may entail potential personal exposure.” 

Take Steps to Protect Your Medical Director Arrangements

The Fraud Alert notes that the OIG “recently reached settlements with 12 individual physicians who entered into questionable medical directorship and office staff arrangements.”  The office staff arrangements were problematic because the health care entity to which the physicians made referrals were paying or subsidizing the physicians’ employees’ salaries, which is a form of “remuneration.” 

According to the Alert’s summary, it appears that the questionable arrangements conflicted with the anti-kickback statute because of three factors: 

• The payments did not reflect fair market value for the medical director services to be performed;  

• The payments took into account the physicians’ volume or value of referrals, and  

• The physicians did not actually provide the services called for under the agreements. 

“Anesthesiologists who are in a position to refer patients to the facility, e.g., for pain management procedures or for pre-operative testing, should take care, therefore, to structure all their compensation arrangements (not just medical directorships) so as to maintain consistency with fair market value and to avoid inferences that the payments are kickbacks for referrals,” Mira says.  

The OIG has created a number of “safe harbors” that define the circumstances under which certain financial arrangements will be considered not to involve prohibited “remuneration.” Structuring a medical directorship to comply with the safe harbor is the surest way to immunize the arrangement from an adverse determination and heavy fines and penalties. Regulation (42 C.F.R. § 1001.952(d)) sets forth seven standards that must all be met before safe harbor will apply. These are:

1. The agency [personal services] agreement is set out in writing and signed by the parties.  

2. The agency agreement covers all of the services the agent provides to the principal for the term of the agreement and specifies the services to be provided by the agent. 

3. If the agency agreement is intended to provide for the services of the agent on a periodic, sporadic or part-time basis, rather than on a full-time basis for the term of the agreement, the agreement specifies exactly the schedule of such intervals, their precise length, and the exact charge for such intervals.  

4. The term of the agreement is for not less than one year.  

5. The aggregate compensation paid to the agent over the term of the agreement is set in advance, is consistent with fair market value in arms-length transactions and is not determined in a manner that takes into account the volume or value of any referrals or business otherwise generated between the parties for which payment may be made in whole or in part under Medicare, Medicaid or other Federal health care programs. 

6. The services performed under the agreement do not involve the counseling or promotion of a business arrangement or other activity that violates any State or Federal law. 

7. The aggregate services contracted for do not exceed those which are reasonably necessary to accomplish the commercially reasonable business purpose of the services. 

What it means: A written agreement for a term of at least one year that sets fair-market value compensation in advance should ideally be behind any arrangement in which an anesthesiologist receives a payment or any other financial benefit for serving as medical director.  

“Note, in particular, that the agreement must ‘specify exactly’ the amount of time that a part-time medical director (which will include most anesthesiologists in the role) will devote to the responsibilities of the position, as well as its associated charge,” Mira says. “It is advisable for the part-time medical director to document the hours spent and in fact many contracts require such documentation.” 

Calculation: Determining an adequate fair market value is key to the arrangement, but is difficult because there are not published legal standards or formulas for physician compensation valuations. Your fair market value analysis should consider all factors relevant to the specific medical director arrangement. These might include the value of the individual physician’s time based partly on his or her hourly earnings from clinical practice; calculated hourly rates prevailing in the community (opportunity cost) based on salary survey data; and the cost to the hospital if it were to obtain comparable services elsewhere.  

Final advice: “When there is a serious issue as to whether the medical director compensation is intended to induce or reward referrals, it will often be wise to obtain an expert third-party assessment,” Mira notes. “Many hospitals will require such expert assessment before entering into medical director contracts.”