The Office of the Inspector General of the Department of Health and Human
Services (OIG) issued Advisory Opinion No. 08-22 on Dec. 8, 2008. In the
Advisory Opinion, the OIG analyzed a proposed arrangement under which a
nonprofit, tax-exempt corporation (the "Corporation") would employ two
physicians on a part-time basis to perform endoscopies on the premises of the
Corporation (the Proposed Arrangement").
The Corporation requested the Advisory Opinion to determine whether the
Proposed Arrangement would constitute improper remuneration in exchange for
referrals under 42 U.S.C. §1320a-7b (the "Anti-Kickback Statute"). The OIG
concluded that the Proposed Arrangement does not violate the Anti-Kickback
Statute and would not be grounds for imposing sanctions.
The facts presented in the Advisory Opinion indicate that each of the two
physician employees has a separate medical practice at a separate location from
that of the Corporation. In addition, the Corporation certified that the
physician employees will be bona fide employees, and that it would pay a salary
to each of them based on fair market value for their professional services.
The Advisory Opinion does not, however, specify whether each salary will be
paid on a fixed annual basis or on a per treatment basis. In addition, it does
not analyze the criteria the Corporation used to determine whether the two
physicians will be bona fide employees. Rather, the OIG relies on the
Corporation's certification that the physician employees will be bona fide
These two unanswered issues are of critical importance because some hospitals
have paid "very" part-time (i.e., on a sporadic, when scheduled basis)
independent surgeons professional fees for services on a per case basis to
handle cases at their hospitals. Questions are often raised as to whether these
are disguised efforts to purchase the referral of cases or truly a means to pay
The Advisory Opinion also did not address the level of control providers must
have over an individual for such a person to be considered a bona fide employee.
This is important because hospitals and providers have much greater latitude
under the Anti-Kickback Statute as to how they pay bona fide "employees" as
opposed to independent contractors.
The Anti-Kickback Statute generally prohibits the knowing and willful
offering, payment, solicitation or receipt of any remuneration to induce or
reward referrals of items or services reimbursable by a Federal health care
program. Remuneration includes the transfer of anything of value directly or
indirectly, overtly or covertly, in cash or in kind, for such services.
However, the Anti-Kickback Statute contains exceptions for certain types of
arrangements that do not constitute "remuneration" including "any amount paid by
an employer to an employee who has a bona fide employment relationship with the
employer for employment in the provision of covered items or services." The
Department of Health & Human Services has defined this exception further by
regulation at 42 CFR §1001.952(i).
The OIG concluded that the Proposed Arrangement meets the exception set forth
in the Anti-Kickback Statue and at 42 CFR §1001.952(i). Thus the salary paid to
the part-time physician employees would not constitute prohibited remuneration
under the Anti-Kickback Statute. The OIG noted that its opinion is limited to an
analysis of the Anti-Kickback Statute, and it did not offer an opinion regarding
whether the Proposed Arrangement would violate the Physician Self-Referral Law
(42 U.S.C. §1395nn, the "Stark Law").
Further, the OIG stated that the exception related to payments to employees
under the Stark Law differs materially from that under the Anti-Kickback
Statute. Specifically, the amount of remuneration paid to an employee by an
employer must be at fair market value to meet the regulatory exception to the
Stark Law related to payments to employees. This is not a requirement of the
exception to the Anti-Kickback Statute. Therefore, providers should ensure that
an analysis of such an arrangement includes an analysis of both the
Anti-Kickback Statute and Stark Law, as the exceptions to both laws differ
materially in regard to provider payments to part-time physician employees.