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Physicians’ Compensation For Certain Referrals Could Violate Anti-Kickback Statue

Anti-KickbackOIG Reminds Physicians That They Will Be Held Liable For Illegal Payments Under The Anti-kickback Statute

On June 9, the Department of Health and Human Services Office of Inspector General (OIG) issued a Special Fraud Alert warning against potential liability for physicians who enter into certain financial arrangements with healthcare institutions.

The Fraud Alert states that “if even one purpose of the arrangement is to compensate a physician for his or her past or future referrals” the compensation arrangement would violate the federal Anti-kickback statute.

The Fraud Alert discussed a recent settlement regarding an arrangement between several physicians and a healthcare institution. It emphasized that the following factors resulted in an OIG determination that there was improper remuneration:

  • Payments to physicians took into account the physician’s volume or value of referrals and did not reflect fair market value for the services performed
  • Physicians did not actually provide the services called for under the arrangement
  • The arrangement relieved the physician of a financial burden that such physician would have otherwise incurred, e.g., a healthcare institution paid for the physician’s office staff at his or her practice

Although the Fraud Alert does not change any existing laws, it is a reminder that physicians (not just the hospitals) will be held liable for illegal payments. Physicians should heed OIG’s warning and ensure that arrangements with healthcare institutions do not violate any laws. All arrangements must not only comply with the federal Anti-kickback statute, but also other fraud and abuse laws such as the Stark Law, the Civil Money Penalties Law (CMP Law), and the state law Stark and Anti-kickback counterparts.

The Special Fraud Alert can be found here.

If you are a physician with questions about a current or proposed arrangement with a healthcare institution, please call Danielle Hildebrand or DJ Jeyaram at 678-325-3872 for legal counsel.

Physicians’ Medicare Payments No Longer Tied To Economy

SRGAfter almost 20 years, Congress finally passed a law repealing the Sustainable Growth Rate (SGR ). Under SRG, Medicare payments to physicians were tied to the growth rate in the economy. Because of the sluggish economy during and after the Great Recession, the growth rate formula has resulted in either a reduction or inadequate increase in Medicare reimbursement rates. As a result, Congress recently passed last minute, short-term fixes to ensure that physicians receive the appropriate fees.

With the passage of the new law, physicians will finally see stabilization in Medicare payments. The statute provides for a 0.5% increase for the next five years. Then the government will transition to a new system in which payments will be based on quality, value and accountability – the Merit-based Incentive Payment System.

The repeal of SGR is good news for physicians treating Medicare patients. Because Medicare reimbursement rates have been so unpredictable for the last decade, physician practices  have had little opportunity to arrange for innovative care models. With the new law, physicians have the chance to come up with groundbreaking care delivery models while developing patient care protocols focused on quality and gearing up for the next phase in Medicare reimbursement.

If you are a physician with questions about Medicare reimbursement or enrollment, or need healthcare regulatory advice, please contact DJ Jeyaram at or Danielle Hildebrand at

DCH Adopts New Rules for Rural Hospitals

DCH Rural HospitalsA potential solution to rural hospitals’ funding challenges

A few months ago, the Georgia Board of Community Health (DCH) adopted new rules that allow rural hospitals to reduce the scope of services provided and operate as a rural free standing emergency department. This provides an alternative to closing down operations for rural hospitals which may be struggling with funding operations on a full service scale. It also provides an opportunity for rural hospitals that recently ceased operations (and have either maintained a current DCH license or their license expired within the last 12 months) to re-open their doors.

Hospitals interested in pursuing this course of action must meet certain conditions including:

  1. The hospital must be located in a rural county (population under 35,000);
  2. The hospital must be located within 35 miles of a licensed general hospital;
  3. The hospital must be open 24 hours a day, 7 days a week; and
  4. The hospital must provide non-elective emergency treatment for periods continuing less than 24 hours.

Like the general and specialized hospitals, the rural free standing emergency department must obtain a permit to operate, as well as a specific license to operate as a rural free standing emergency department.

The new rules also require that specific operational elements be put in place. For example, a free standing emergency department must attempt to enter into an agreement with the surrounding hospitals and provide in that agreement a mechanism for patient transfer.

One controversial requirement set forth in the new rules is the requirement to provide certain medical services to patients such as medical screenings and treatment to stabilize without considering the individual’s ability to pay. Jimmy Lewis, CEO of the Georgia Rural Hospital trade organization, has stated that this rule may be unfair to the new stand-alone EDs because the transferee hospital “most often objects if the patient is a no-pay thus keeping the patient in the ED beyond licensure capability.” See

Furthermore, rural free standing EDs will have to bill Medicare and Medicaid at a lower provider rate rather than the current hospital rates. As of May 20, 2014, the application to become a rural free standing emergency department was made available by DCH. See application-packet-5192014. According to DCH’s instructions, hospitals should submit a completed application along with supporting documentation at least 6 weeks prior to the planned opening date of the facility. If you are a hospital considering taking this step, the following items should be obtainedand/or completed to support your application:

  1. evidence that the hospital’s Certificate of Need authorization is still active;
  2. an application for a permit;
  3. notarized affidavits regarding ownership identification;
  4. a written request to conduct an initial licensure survey; and
  5. a statement from the local fire safety authority stating that an inspection has been made of the premises and that the state and local fire safety requirements have been met and the facility is approved for occupancy.

If you have any questions or would like legal assistance,  please contact Danielle Hildebrand at

Office of Inspector General’s Advisory Could Affect Payment to All Healthcare Providers

OFFICE OF INSPECTOR GENERAL DEPARTMENT OF HEALTH AND HUMAN SERVICES SEALOn May 8, 2013, the Office of Inspector General (“OIG”) issued an Advisory Bulletin pertaining to exclusion and excluded healthcare providers.  Because exclusion could potentially affect every provider, it is important to learn more details about the designation.

If the OIG excludes a provider, then no Federal health care program payments may be made for items or services furnished by the excluded provider or prescribed or directed by the excluded provider.  If the excluded provider changes from one health care profession to another, the exclusion will still be in effect.

In addition, the prohibition is not limited to direct patient care; it also includes services such as review of treatment plans, preparation of surgical trays, or services provided related to filling prescriptions.  Transportation services provided by excluded individuals are also prohibited.

Finally, according to the Bulletin, excluded individuals are prohibited from providing any administrative or management services, even if they are not separately billable.

There are severe consequences if an excluded individual submits a claim or causes a claim to be submitted to a Federal health care program.  A civil monetary penalty of $10,000 per claimed item or service may be imposed.  In addition, any potential for reinstatement to Federal health care programs may be jeopardized.  Criminal penalties may also be imposed.

Civil monetary penalties may be imposed against providers that employ or enter into contracts with excluded individuals to provide items or services payable by a Federal health care program.  Further, there may be civil monetary penalties for health maintenance organizations that contract with or employ excluded individuals.  This does not mean that entities cannot hire or contract with excluded individuals at all.

If the services or items provided are not paid for by a Federal health care program, then there isn’t a prohibition against hiring or contracting with an excluded individual.  If the excluded individual only provides services or items to patients that are not covered by a Federal health care program, then there is no prohibition.

All individuals and entities should search the OIG program exclusion information that is available on the OIG Web site prior to employing or contracting with any provider of health care services and keep documentation of the search. 

In addition, individuals and entities should proactively monitor the exclusions database to ensure that none of its current employees or contractors is listed as an excluded provider.  Due diligence will help mitigate the risk of civil monetary penalties in the future.

Changes to Medicare’s “Incident To” Regulations Impact Physician Reimbursement

For physicians and other licensed practitioners utilizing “incident to” billing for occupational or physical therapy services under Medicare, new federal regulations may impact current and future staffing decisions. Providers should ensure that the person providing those “incident to” services qualifies for Medicare reimbursement under the applicable federal regulations.

As of July 25, 2005, for therapy services to be reimbursed by Medicare, the therapy must be delivered by either a physician or by someone that qualifies as a “therapist” under the federal regulations. Generally, 42 CFR § 484.4 requires that the physical or occupational therapy provider have graduated from physical or occupational therapy program respectively. 1 Therefore, despite extensive training in occupational and physical therapy, chiropractors will be unable to provide “incident to” therapy services and be reimbursed by Medicare, unless the chiropractor meets the specific criteria set forth in the Code of Federal Regulations. The new regulations will affect joint ventures between physicians and chiropractors where chiropractors provide certain therapy services “incident to” services provided by the physician, but are not qualified as a “therapist” under the regulations.

Likewise, physical or occupational therapy services provided “incident to” the services of a chiropractor under the Medicare Chiropractic Demonstration Project 2 will not be reimbursed unless the person who furnishes the service is a “qualified practitioner” under the regulations. Strangely, although a “qualified practitioner” under federal regulations is defined as an individual who has graduated from a physical or occupational therapy program or has equivalent educational credentials, as outlined in 42 CFR §484.4, there is no requirement that the therapist actually hold a license under applicable state law.

The American Chiropractic Association (ACA) has been strenuously lobbying the Centers for Medicare and Medicaid Services of the Department of Health and Human Services (CMS) to recognize that chiropractors receive extensive education and training in physical therapy and currently provide such services to patients under most state laws. To this point the ACA has been unsuccessful in having CMS revisit the regulations.

For more information contact us at 404.995.6792 or at

This article is presented for educational and informational purposes only and is not intended to constitute legal advice.

About the Author

Deepak (“D.J.”) Jeyaram is the founder of Jeyaram & Associates, a full service health law firm. He represents a wide variety of healthcare providers including hospitals, nursing homes and physician group practices. He concentrates his practice in healthcare regulatory matters, primarily in administrative appeals and Medicare and Medicaid reimbursement.

His prior experience includes working in-house with Georgia Medicaid, rising to the position of Deputy Director of Legal Services. Later in his career, Jeyaram was an Administrative Law Judge who presided over disputes between the Georgia Department of Community Health and Medicaid providers on issues involving reimbursement, utilization review and provider termination. Jeyaram received his bachelor’s degree, cum laude, from Boston University and his law degree from Emory University.

1 There are exceptions for experienced physical therapists who have not graduated from a program but have the requisite experience and have passed a proficiency exam given by the U.S. Public Health Service and for therapists who were licensed prior to 1966 and have accrued 15 years of experience full-time physical therapy experience prior to 1970 under the direction of a M.D. or D.O.

2 The Chiropractic Demonstration Project is currently unavailable in Georgia.