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On Wednesday, May 21st, the OIG posted a new Advisory Opinion, 09-05 evaluating a poposed on-call compensation arrangement between a hospital and the specialists on its medical staff.   The Hospital proposed an arrangements where members of its medical staff who agreed to provide on-call coverage to the Hospital's emergency department on a schedule established by the Hospital would be compensated on a per encounter basis for encounters with those patients who came to the Hospital ED who were otherwise indigent and uninsured.

What makes this Advisory Opinion interesting is not the Hospital's proposed methodof paying the on-call physicians although it is creative and will be something I will propose to clients who struggle with how to do this.  Its not the fact the OIG felt that any on-call compensation arrangement would pass muster under an Anti-Kickback analysis, OIG has recognized that such arrangements can be necessary and appropriate in certain circumstances.  

It is the fact that the OIG seems to have given up on the idea of trying requiring that such arrangements be limited to areas where there are physician/specialist shortages.  OIG acknowledges that, "on-call coverage compensation potentially creates considerable risk that physicians may demand such compensatiion a s a condition of doing business at a hospital, even when neither the services provided nor any external market factor (e.g., a physician shortage) support such compensation."  But, despite this acknowledgement, OIG required nothing in the proposed on-call compensation arrangement to ensure that this was not a situation where the physician specialists were merely holding the Hospital hostage.

As a result,  we need to expect that more and more and more physician specialists will now demand that their hospitals pay them to take call coverage in the ED and will point to this Advisory Opinion as the basis for asserting that there are no compliance justifications or market force elements that might exist in the particular hospital's market to justify a hospital's refusal to make those payments.   At a time when more and more hospitals are operating at a net loss and without any extra income to cover such expenses, hospitals will be increasingly asked by physicians to find the money somewhere. 

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On August 26, 2008 the OIG issued Advisory Opinion No. 08-10, expressing significant concern for a proposed block lease arrangement between a physician group that operates a free-standing facility providing certain cancer treatment services, including intensity-modulated radiation therapy (IMRT) and a urology group that often treats patients who might benefit from receiving IMRT.

The proposed arrangement involved the urology group entering into a series of contracts that would create a "block lease" of the other physician group's IMRT facilities, including space, equipment, administrative and clinical personnel, and radiologist services to supervise the IMRT procedures.  In evaluating the arrangement under the federal anti-kickback statute, the OIG noted that the urology group would not actually participate in performing any component of the IMRT service and would contract out substantially all of the services, including all of the professional services. 

The OIG concluded that the proposed arrangement was designed to allow the group owning the IMRT facility to do, indirectly, what the anti-kickback statute is intended to prohibit it from doing directly ... "pay the urology group a share of the profits for their IMRT referrals."  The OIG concluded that by agreeing to a deal that gave the urology group the opportunity to retain the difference in reimbursement between what was paid for IMRT services provided to the urology group's patients and the rents and fees it would pay to purchase the services, the urology group would be receiving improper remuneration for referrals for IMRT services. 

For physician groups currently engaged in block lease arrangements, this Advisory Opinion should be reviewed carefully.  Counsel to such group may need to advise their clients that a renegotiation of existing arrangements is required in order to bring such financial arrangements squarely into compliance with the federal anti-kickback statute and avoid the risk of civil and criminal sanctions.

A copy of Advisory Opinion 08-10 can be found here. 

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