OIG warns doctors to scrutinize business arrangements

The inspector general suggests questions physicians should ask to avoid fraudulent practices.

By Tanya Albert, amednews staff. May 12, 2003.

The government is worried that illegal joint ventures are growing rapidly in the medical community, and it is urging physicians to take the time to make sure their arrangements are on the up-and-up.

The Dept. of Health and Human Services Office of Inspector General in late April released a special advisory bulletin outlining several questions physicians should ask themselves about joint ventures to spot agreements that could violate the anti-kickback statute and land a physician or other health professional in prison.

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"The Office of Inspector General has become aware of a proliferation of arrangements between those in a position to refer business, such as physicians, and those providing items or services for which Medicare or Medicaid pays," the OIG said in its special advisory bulletin.

The office says warning bells should go off if a physician encounters arrangements in which:

An owner of the new business -- whether it be a physician, hospital or other entity -- is expanding into a related business that is wholly dependent on patient referrals from the existing business.
An owner doesn't operate or commit substantial resources to the new business.
The contracting entity, such as the physician, would be a competitor if the written arrangement wasn't in place.
The owner is paid based on his or her referrals to the new business.
The payments typically vary with the value or volume of the business generated for the new business owner.
The contracting physician would provide services, such as the day-to-day management, billing services, equipment, personnel and related services, office space, training and health care items, and supplies and services.
The practical effect of the arrangement overall gives the owner the opportunity to bill insurers and patients for business that the physician normally would provide.
There is a noncompete clause in the agreement that prohibits the physician from providing services to the owners' patients.

Health lawyer John T. Brennan Jr. said these arrangements were already illegal.

"Physicians have always had to worry about financial arrangements they've had with hospitals," said Brennan, a lawyer with Crowell & Moring in Washington, D.C., who specializes in fraud and abuse cases. "But the OIG is saying it's going to take a little closer look at these relationships, and the advisory bulletin is a warning system."

Violating the anti-kickback statute is a felony, and physicians or others who break the law face a maximum of a $25,000 fine and five years in prison.

The OIG can also exclude physicians from Medicare and other federal health care programs, and can impose civil penalties of up to $50,000.