Becker's Hospital Review

Sign up for the COMPLIMENTARY Becker's Hospital Review CEO Report & CFO Report E-Weeklies at www.BeckersHospitalReview.com or call (800) 417-2035 4. No payment for ancillary services. Under the Stark Law and the Anti-Kickback Statute, physicians cannot receive payment for the volume or value of referrals made for technical services. Specifically, this means that although a physician may be compensated for the services that he or she personally performs (e.g. consultations and surgeries), the physician cannot be compensated in any manner for referring a patient for ancillary services such as diagnostic tests, physical therapy or the prescription of durable medical equipment. A physician, however, may be compensated for personally performing the professional component of an ancillary service (i.e., radiology reads). The rules regarding ancillary services in a hospital-physician relationship are different than the rules regarding ancillary services applicable to a physician practice. In a physician group practice setting, under certain circumstances the practice is permitted to distribute revenues generated from ancillary services to physician members of the group practice — a hospital, however, is strictly prohibited from making such payments to its physician employees.    5. IRS guidelines and tax-exempt entities. The IRS has stated that when determining whether a physician's compensation is appropriate, the tax-exempt hospital should ensure the total compensation package provided to a physician is reasonable for the physician's specialty and area. The IRS created a rebuttable presumption whereby physician compensation is reasonable if (i) the compensation arrangement is approved in advance by an authorized body of the applicable tax-exempt hospital, which is composed of individuals who do not have a conflict of interest concerning the employment arrangement, (ii) prior to making its determination, the authorized body obtained and relied upon appropriate data as to comparability, and (iii) the authorized body adequately and timely documented the basis for its conclusion concurrently with making that determination. If, however, an employment arrangement does not satisfy the rebuttable presumption requirements, a facts and circumstances approach will be followed, and intermediate sanctions may be imposed if it is found that the compensation is excessive. Intermediate sanctions may include the imposition of an excise tax against the physician and the hospital manager who approved the employment arrangement. The intermediate sanctions rules only apply to compensation arrangements with "disqualified persons." Disqualified persons are persons who are in a position to exercise substantial influence over the organization; this can include employed physicians, especially where the employed physician is highly compensated or holds an administrative position. However, even if a compensation arrangement does not involve a disqualified person, a tax-exempt institution cannot pay more than fair market value due to the restrictions on private inurement.   6. Fair market value surveys. Fair market value is typically supported by surveys from third parties. In its commentary to the Stark Law, CMS recommends the use of multiple, objective, independent published surveys for evaluating the FMV of physician compensation. Commonly used surveys to determine the FMV of a physician's compensation are the (i) Medical Group Management Association compensation survey, (ii) the Group Practice Compensation Trends survey published by the American Medical Group Association and (iii) the Physician Marketplace Statistics survey published by the American Medical Association. Using fair market value surveys alone, however, is not enough. The surveys must be appropriately applied to the given compensation arrangement and considered alongside other factors. For example, the base data used to calculate future compensation should be a reasonable indicator of future productivity, i.e. there should be no cherry-picking of baseline data to yield a higher future compensation figure. Further, as discussed above, ancillary profits should not be taken into account when evaluating compensation. It is also unreasonable to use median survey figures to determine compensation for all physicians — a physician's compensation should generally reflect his or her own productivity. Lastly, hospitals must take into account all sources of physician revenue to ensure the sum of the parts is still FMV and commercially reasonable. For example, if a physician holds multiple medical director positions, is eligible for bonuses and maintains a private practice, consideration must be given to each of these revenue sources when determining the FMV of physician's compensation. 7.  False claims. A claim for items or services resulting from a violation of the Stark Law or Anti-Kickback Statute constitutes a false claim under the False Claims Act. The FCA imposes liability on persons and companies who defraud governmental programs. The FCA includes a "qui tam" provision that allows people who are not affiliated with the government to file actions on behalf of the government (informally called "whistleblowing"). Over the past several years, 13 the federal government has continually amended the FCA to provide it with more teeth. Numerous cases demonstrate the application of the FCA to healthcare companies. Most recently, in July 2013, the Department of Justice announced that it would intervene in a FCA lawsuit against Infirmary Health System Inc. and its related entities, including IMC-Diagnostic and Medical Clinic P.C. and Diagnostic Physicians Group P.C. The lawsuit alleges that IMC-Diagnostic and Medical Clinic improperly paid Diagnostic Physicians Group physicians compensation that included a percentage of the money collected from Medicare for tests and procedures the doctors referred to the clinic. The qui tam plaintiff alleges that the improper payments resulted in the submission of false claims to the Medicare program and violate both the Stark Law and the Anti-Kickback Statute. 8. Relevant case examples. Below are some recent cases and settlements that have focused on the Stark Law or Anti-Kickback Statute issues related to physician compensation. a. Covenant Medical Center (Waterloo, Iowa). Covenant was alleged to have violated the Stark Law by paying commercially unreasonable compensation to five physicians in return for referrals. The physicians were allegedly among the highest paid hospital-employed physicians in the entire United States, with two of the five physicians making more than $2 million per year. The hospital settled for $4.5 million. b. Toumey Hospital (Sumter, S.C.). In Toumey, after a multi-year legal battle a jury concluded that the compensation paid to physicians under certain part-time employment agreements violated both the FCA and the Stark Law. The jury concluded that even though Tuomey relied upon an expert assessment of the fair market value of the employment agreement, when other factors were considered, the arrangements were in essence payment for referrals. Under the FCA, Tuomey's penalties could exceed $350 million. Sign Up Today! Hospital CFO Report Concise, practical information for hospital CFOs and financial leadership Current news, analysis and best practices on hospital revenue cycle issues, including coding, billing and collections, the transition to ICD-10 and Recovery Audit Contractors To sign up for the FREE E-Weekly, visit www.BeckersHospitalReview.com or call (800) 417-2035

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