More Tips to Physician Contract Compliance

Contracts and financial arrangements with physicians must be structured to ensure compliance with Stark1, Anti-Kickback2 and Civil Monetary Penalties Laws3. If physicians refer patients for items for services payable by Medicare, Medicaid and other healthcare programs, noncompliance can become a a big problem for both the physician and the healthcare organization. Noncompliance may result in overpayments and failure to report overpayments within 50 days may violate the False Claims Act, subjecting parties to additional penalties including treble damages, fines of $5,500 to $11,000 per claim and exclusion from Medicare and Medicaid. With severe penalties for noncompliance, hospital and other healthcare providers should keep physician contracts as a priority to ensure strict compliance.

Should you have a violation, Federal law prohibits hospitals from submitting Medicare and Medicaid claims for payment if the contract violates Stark or the Anti-Kickback Statute. Further, this suspension continues until all problems with the contract are resolved and any overpayment has been remitted. Simply fixing the problem does not cure all past problems so staying on top of potential compliance issues should be a priority.

To stay ahead of any potential compliance issues, mitigate risk with these five tips for ensuring physician contracts are compliant with Stark Law and other statutes.

  1. Pay Fair Market Value for Services. Over- or underpaying a referring physician violates Stark and may be seen as payment for referrals under the Anti-Kickback Statute. Fair market value is dependent on the situation—including the nature, volume and value of services performed, and the price paid for similar services in the market exclusive of referrals. Compensation must reflect the physician’s circumstances. When evaluating fair market value, consider all remuneration provided to the physician (compensation, benefits, insurance or anything else of significant value).
  2. Identify the Services to be Performed. Employment contracts must identify specific services to be performed. If the entity has more than one contract with the contractor/physician, the contracts should reference each other or a master should list of all the contracts.
  3. Ensure the Contract has not Expired, Lapsed or Terminated. Sometimes people get into such a routine that even when the contract expires, they continue as if it were still in force. This can create a problem for independent physician contractors since Stark contains an exception that allows the parties to an independent contractor agreement to continue for up to six months after expiry if conditions are still met; otherwise, failure to have a current written contract agreement will most likely violate Stark. Adding an automatic renewal provision often minimizes this potential problem.
  4. Set Compensation Formula in Advance. If a hospital intends to require employed physicians to refer services to the hospital, the physician’s compensation formula must be set in advance. For independent contracted physicians, the compensation formula must be set in advance and be objectively verifiable. Do not adjust an independent contracted physician’s compensation retroactively or you will create a red flag for both Stark Law and Anti-Kickback noncompliance.
  5. Ensure all Parties Perform the Services as Specified in the Agreement. Paying a physician for services that were not performed may be viewed as paying for referrals. During the course of a contract, parties often become complacent and performance may decline. Both the contract manager and the physician’s performance should be audited periodically to ensure the physician is rendering services which s/he is being paid and the hospital is performing accordingly as well.

An Ounce of Prevention is Worth a Pound of Cure. Given the serious penalties, make contract compliance a priority in your healthcare organization. Start off right and ensure contracts are structured properly from the get go. Take the time to review compliance initiatives.

Periodic audits can identify gaps in documentation or other potential compliance issues that can trigger further scrutiny. Physician agreements for directorships, on-call or co-management arrangements can further mitigate risk of noncompliance by incorporating a timekeeping contract compliance app to ensure time logged is completed properly and compliant with each physician agreement. Our TRACE physician timekeeping contract compliance app eliminates the problem with logging physician time. Physicians can accurately log time in just seconds using the TRACE mobile app and the hospital has a complete audit trail. Dynafios also offers auditing services to provide insight into potential compliance issues and recommendations for realignment. Make compliance issues simply disappear. To learn more, call Dynafios today at 877.858.3282 or email info(at)dynafios.com.

1The Ethics in Patient Referrals Act (“Stark”) generally prohibits physicians from referring patients to entities with which the physician (or the physician’s family member) has a financial relationship for certain designated health services payable by Medicare unless the transaction is structured to fit within a regulatory safe harbor. 42 USC § 1395nn; 42 CFR § 411.353. (Health Law Blog, January 2014)
2The federal Anti-Kickback Statute generally prohibits offering, soliciting, paying or receiving remuneration to induce referrals for items or services payable by federal healthcare programs unless the transaction fits within a regulatory safe harbor. 42 USC § 1320a-7b(b); 42 CFR § 1001.952. Significantly, the Anti-Kickback Statute is violated if “one purpose” of the proposed transaction is to induce such referrals unless the arrangement fits within one of the regulatory safe harbors. United States v. Greber, 760 F.2d 68 (3d Cir. 1986). (Health Law Blog, January 2014)
3Civil Monetary Penalties Law prohibits a hospital from knowingly making a payment to a physician as an inducement to reduce or limit services provided to Medicare beneficiaries. 42 USC § 1320a-7a(b). (Health Law Blog, January 2014)

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