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05/01/2005 |
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James B. Wieland Appeared in RBMA Bulletin
Application of the federal anti-kickback statute to contract arrangements between hospitals and hospital-based physicians has been the subject of debate for more than a decade. In the late 1980s, a wave of hospital initiatives seemed to tie hospital-based contracts with radiologists and other hospital-based specialties to financial contributions from the radiologists, some as straight-forward as a contractual requirement that the radiologist, as a condition of the (often exclusive) contract, pay all or a portion of professional fees earned at the hospital to the hospital. In 1991, the Office of the Inspector General (OIG) issued a Management Advisory Report (MAR) alerting CMS (then known as HCFA) to contract arrangements that potentially violate the anti-kickback statute. According to the OIG, these arrangements appeared to require hospital-based physicians to pay more than fair market value for services provided by hospitals. The OIG referred specifically to requirements for hospital-based physicians to pay a percentage of revenues, such as discussed above, and to other in arrangements in which, instead of payment of a portion of fees by the hospital-based physician, the contract required the provision of services that the hospital might otherwise have to acquire at a market price. The OIG characterized this as when “[a] hospital provides no, or token, reimbursement to pathologists for Part A services in return for the opportunity to perform and bill for Part B services at that hospital.” In Draft Supplemental Compliance Program Guidance for Hospitals published by the OIG last June, the OIG stated that an arrangement between a hospital and hospital-based physicians might violate the anti-kickback statute if the hospital paid the physicians less than fair market value for their goods or services, or required the physicians to pay more than fair market value for the hospital’s services. 69 Fed. Reg. 32,012, 32,021–22 (June 8, 2004). The OIG acknowledged the existence of contract arrangements in which hospital-based physicians performed management, staffing, and other administrative functions, and, in some cases, limited clinical duties “at no cost to the hospitals.” Two things were significant in such arrangements, according to the OIG. First, such arrangements benefited both parties. Second, the OIG indicated that the value from the arrangement may be unrelated to the hospital-based physicians’ opportunity to furnish services to hospital patients. The OIG went on to state, “In an appropriate context, an arrangement that requires a hospital-based physician or physician group to perform reasonable administrative or clinical duties directly related to their hospital-based professional services at no charge to the hospital or its patients would not violate the anti-kickback statute.” 69 Fed. Reg. at 32,022. This single sentence caused significant alarm, particularly to hospital-based physicians and their trade organizations. The College of American Pathologists (CAP) characterized this statement as “a step backward” — a basis for hospitals to refuse to appropriately pay pathologists for directing the hospital’s clinical laboratory. CAP requested that the final document state that token or no payment for pathologist Part A and medical direction services in exchange for Part B referrals violated the anti-kickback statute. The final supplemental guidance was issued on January 31, 2005. 70 Fed. Reg. 4858 (Jan. 31, 2005). In the final guidance, the OIG indicated that illegal contracts could include arrangements that required physicians to pay a hospital more than fair market value for the hospital’s services, or in which a hospital paid physicians less than fair market value for goods or services the physicians provided. Thus, the OIG confirmed that it had not reversed its long-standing position that a hospital might violate the anti-kickback statute by requiring hospital-based physicians to furnish services to the hospital without compensation for those services. However, the OIG went on to state: [A]rrangements that require physicians to provide Medicare Part A supervision and management services for token or no payment in exchange for the ability to provide physician-billable Medicare Part B services at the hospital potentially violate the anti-kickback statute and should be closely scrutinized. 70 Fed. Reg. at 4867. This statement was not the clear-cut prohibition against “token or no payment” for Part A services that had been sought by CAP. The OIG also introduced a framework for evaluating exclusive contract arrangements under the anti-kickback statute that permits benefits from the exclusive arrangement to be acknowledged as part of financial arrangements between hospitals and hospital-based physicians. The OIG acknowledged that the exclusivity aspect of arrangements between hospitals and hospital-based physicians “affect the cash and non-cash value of the overall arrangement to the respective parties.” According to the OIG, “depending on the circumstances,” the exclusive contract could have substantial value to the hospital-based physicians and to the hospital, “that may well have nothing to do with the value or volume of business flowing between the hospital and the physicians.” For example, “an exclusive arrangement may reduce the costs a physician or group would otherwise incur for business development and may eliminate administrative costs otherwise incurred by the hospital.” The OIG stated that if the overall arrangement was consistent with fair market value in an arm’s-length transaction, taking into account the value attributable to the exclusivity, then in an appropriate context, “an exclusive arrangement that requires a hospital-based physician or physician group to perform reasonable administrative or limited clinical duties directly related to the hospital-based professional services at no or a reduced charge would not violate the anti-kickback statute.” According to the OIG, “depending on the circumstances,” this might include “participation on hospital committees, tumor boards, or similar hospital entities; participation in on-call rotation; and performance of quality assurance and oversight activities.” Under the OIG’s analysis, benefits to hospital-based physicians from exclusive arrangements might serve as a basis to require the physicians to provide otherwise uncompensated services. The OIG concluded that “whether the scope and volume of the required services in a particular arrangement reasonably reflect the value of the exclusivity will depend on the facts and circumstances of the arrangement.” At the same time, the OIG cautioned that hospital-based physicians would not be required to furnish such services, stating that “nothing…should be construed as requiring hospital-based physicians to perform administrative or clinical services at no or a reduced charge.” Additionally, the principle recognized by the OIG purports to be a two-way street. For example, hospital-based physicians may rely on administrative savings to the hospital from the exclusive arrangement to offset the value of cost reductions to the physicians that might otherwise support their provision of uncompensated services. The final supplemental guidance might be read broadly to support a position that hospitals may request hospital-based physicians to provide reasonable administrative or limited clinical duties directly related to their professional services in recognition of benefits they receive from the exclusive arrangement. It might also be read more narrowly - consistent with the OIG’s statement that “token or no payment” for Part A supervision and management services potentially violates the anti-kickback statute. Under the more narrow reading, it would be legally permissible for the parties to take into account financial benefits from exclusive arrangements only if the benefits were unrelated to the physicians’ opportunity to provide services to hospital patients resulting from the arrangements. Under that interpretation, “the scope and volume” of services required to be performed by hospital-based physicians, without charge, should “reasonably reflect the value of the exclusivity,” in other words, value that is unrelated to the value or volume of business flowing from the hospital to the physician. |
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Ober, Kaler, Grimes & Shriver Maryland
Washington, D.C. Virginia |
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