Antikickback compliance is essential for contracts

Contract Language. By Steven M. Harris, amednews contributor. Dec. 10, 2001.

CONTRACT LANGUAGE

A column examining the ins and outs of contract issues

SEE ARCHIVES

All health care transactions should be closely scrutinized for fraud and abuse issues to ensure compliance with all applicable regulations and to minimize a physician's exposure to civil and criminal sanctions and penalties.

Contractual transactions including executed and proposed employment, medical director, ancillary services, billing services and physician recruitment contracts should be of particular concern.

The current climate of highly publicized fraud and abuse health care cases resulting in unprecedented verdicts, settlements, monetary penalties, and findings of civil and criminal liability has caused increased review and enforcement actions by both state and federal agencies.

Physicians and their attorneys should consider the Medicare-Medicaid Anti-Fraud and Abuse Amendments, when drafting and negotiating any health care contracts. This column provides an overview of the antikickback statute and specific contract issues related to personal services and management contracts and rental of space and equipment.

The antikickback statute prohibits an individual from knowingly and willfully paying remuneration (including any kickback, bribe or rebate) or receiving remuneration in return for referring a patient for the furnishing or arranging of a service covered by Medicare or Medicaid. It punishes not only the payer but also the receiver of prohibited remuneration.

The statute was designed to prevent unnecessary utilization and to eliminate procedures or services that are not medically necessary; to foster patient choice and prevent arrangements that limit the freedom of the patient to choose a provider; and to reduce costs to federal programs.

Any person who violates the antikickback statute is guilty of a felony and upon conviction will be fined or imprisoned, or both.

There is also mandatory exclusion from the Medicare and Medicaid programs for criminal conviction related to program participation. The 1997 Balanced Budget Act also added other potential civil monetary penalties.

Safe harbor exemptions

There are several statutory exceptions that are known as "safe harbors" which the secretary of Health and Human Services recognizes as specific payment practices that would not trigger criminal prosecution and would not serve as the basis for exclusion from Medicare or Medicaid.

These safe harbors include: personal and management service contracts between physicians and institutions; certain investment interests by doctors; space and equipment rental arrangements; sale of medical practices; discounts for items or services; and the waiver of deductibles and coinsurance.

If a contract or business arrangement complies with the particular requirements of a safe harbor, the arrangement will be exempt from criminal prosecution and may not be a basis for exclusion from Medicare or Medicaid.

If the transaction addresses several types of payments covered by more than one safe harbor, all elements of each safe harbor must be met to ensure compliance.

Personal services contracts

If you are contemplating a medical director agreement or other personal service contract with a hospital, to fall within the safe harbor for personal services and management contracts, the agreement must meet the following requirements:

The agreement must be set out in writing and signed by all involved parties.
The agreement must specify the services to be provided.
The agreement must indicate whether the services are provided on a full-time or part-time basis, and if services are provided on a part-time basis, the schedule of services and payments for services must be set in advance.
The term of the agreement must not be less than one year.
The compensation must be set in advance at fair market value which does not take into account volume or value of referrals between the parties.

Physicians should pay close attention to the actual services provided under the contract, the schedule for providing such services, and the compensation amount as it relates to the services and based on fair market value to be in compliance with the personal services and management contracts safe harbor.

Equipment and space rental

A greater number of doctors are renting space and equipment as their practices expand to other locations and to meet the needs of their patients. Physicians who are renting space or equipment should ensure compliance with the safe harbor provisions for rental of space and equipment.

This safe harbor provides that no violation of the antikickback statute will be found for rental of space and equipment if the agreement meets all of the following requirements:

The lease agreement must be set out in writing and signed by all involved parties.
The lease agreement must specify all of the rented premises and equipment.
If the lease agreement provides for periodic payments, the payment amounts are established in advance and do not vary based on volume or other objectionable criteria.
The term of the lease agreement is not less than one year.
The rental charge is consistent with fair market value and does not take into account the volume or value of any referrals made between the parties reimbursed under Medicare or Medicaid.

The bottom line is that physicians and their attorneys should review all existing and proposed contracts and health care transactions for compliance with federal and state regulations to safeguard continued enrollment in Medicare and/or Medicaid and avoid civil and criminal exposure and liability.

Harris, a partner at McDonald Hopkins in Chicago, concentrates on health care law and has counseled physicians, physician networks and health care groups nationally. The author and publisher are not rendering professional advice and assume no liability in connection with its use. He can be reached at 312-280-0111, or by email (sharris@mcdonaldhopkins.com).