Stacked Physician Compensation: Keys to Compliance

Published by Compliance Today

Compensation paid to physicians is under constant scrutiny as the number of healthcare settlements continues to rise both in number and in settlement awards. There has also been a shift by qui tam relators and the government to include both physicians and medical practices in enforcement action cases. Recent settlements have demonstrated the severe financial implications of improper financial relationships as shown in the Table 1 on page 36.

Staying within the law

But what does all this mean? The answer is that any compensation paid to a physician must meet several requirements. It must be commercially reasonable. In the preamble to the Stark Phase II interim final rule, CMS defined commercially reasonable as:

[A]n arrangement will be considered commercially reasonable in the absence of referrals if the arrangement would make commercial sense if entered into by a reasonable entity of similar type and size and a reasonable physician (or family member or group practice) of similar scope and specialty, even if there
were no potential designated health services referrals. 3

Physician compensation must also be consistent with fair market value (FMV). According to the International Glossary of Business Valuation Terms, fair market value is defined as:

The price, expressed in terms of cash equivalents, at which property would
change hands between a hypothetical willing and able buyer and a hypothetical willing and able seller, acting at armslength in an open and unrestricted market, when neither is under compulsion to buy or sell and when both have reasonable knowledge of the relevant facts.4

Compensation paid to physicians must not be in violation of the Stark Law. According to the Office of Inspector General, “The Stark Law (42 USC § 1395nn) prohibits a physician from referring Medicare patients for designated health services to an entity with which the physician (or immediate family member) has a financial relationship, unless an exception applies.”5

The Anti-Kickback Statute (AKS) also figures into physician compensation. According to the Office of Inspector General, “The Anti-Kickback Statute (42 USC § 1320a-7b(b)) prohibits offering, paying, soliciting or receiving anything of value to induce or reward referrals or generate Federal health care program business.”6

And finally, physician compensation must not trigger the False Claims Act,7 and other regulations designed to prevent fraud and abuse. According to the Office of Inspector General, “The False Claims Act (31 U.S.C. §§ 3729–3733) prohibits the submission of false or fraudulent claims to the Government.”

Thus, it is crucial to understand the entire compensation package being paid to a physician in addition to the individual components.

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