While the Department of Justice and the Department of Health and Human Services Office of Inspector General (OIG) have long scrutinized physician compensation arrangements, including medical director agreements, penalties traditionally have been sought against the institutional party to the arrangement and not the individual physicians. OIG’s recent fraud alert indicates this may no longer be the case. The alert states that OIG is focusing on physician compensation arrangements, including medical directorships, as potentially improper payments to physicians for referrals. OIG states that such arrangements may violate the Anti-Kickback Statute if even one purpose of the arrangement is to compensate the physician for past or future referrals and urges physicians to carefully consider such arrangements lest they be held liable civilly or even criminally.

The fraud alert discusses the fact that OIG recently reached settlement agreements with twelve physicians who had entered into problematic medical directorships. According to OIG, the compensation paid to the physicians was above fair market value and took into account the referral volume of the physicians. In addition to the directorships that compensated physicians directly, OIG also took issue with office staff arrangements under which an affiliated entity paid the salaries of physician staff. Because the physicians avoided the responsibility of paying for this staff, OIG alleged that the office staff arrangements were improper remuneration to the physicians. OIG sought to recover civil money penalties from all twelve doctors for the improper agreements.

Given OIG’s focus on this issue, physicians must ensure that any medical director agreement includes appropriate compensation for the services provided. OIG directs physicians to its guidance on the topic, including its Roadmap for New Physicians. The Roadmap states that physicians accepting a medical directorship must assume substantial professional responsibility for the care at the facility by actively overseeing clinical care at the facility, leading the medical staff to meet the standard of care, ensuring proper training and education, and identifying and addressing quality problems. The Roadmap discusses situations in which physicians signed improper medical director agreements that improperly paid for referrals and resulted in settlements of hundreds of thousands of dollars paid to the government.