News and Insights

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The Office of Inspector General (“OIG”) issued a favorable advisory opinion on October 23, 2012, taking the position that there was a low likelihood of abuse where a hospital emergency department made pay per diem payments to specialty physicians for on-call coverage.

This opinion was requested by a tax-exempt, charitable, nonprofit hospital. The hospital pays a per diem fee to 130 specialist physicians to provide unrestricted on-call coverage for its emergency department. The hospital developed the program because of the increasing difficulty in securing specialty physicians for call coverage. The payment does not satisfy a safe harbor for protection from scrutiny under the anti-kickback statute because the aggregate amount of payment is not set in advance. Although the hospital imposes a yearly cap for each specialty providing services, the monthly payments may not reach that cap and will vary over the term of the arrangement. Even given the inability to satisfy a safe harbor, the OIG found a low risk of violation of the anti-kickback statute for a number of reasons. The OIG indicated its concern that the payments could be disguised “lost opportunity” payments, inducements to refer, or payments for unidentified services. The OIG found that the hospital imposed sufficient safeguards to ensure that the per diem payments are fair market value for services actually provided and not determined by the amount or number of referrals or other business generated between the parties.

Among the factors that minimized the potential for abuse, the OIG noted that funds for each specialty were determined annually in advance of the payment. Additionally, the payments were administered uniformly to all physicians that were subject to call coverage requirements as a result of medical staff requirements. These factors offset the risk, according to the opinion, that payments would be made in such a manner as to reward high-volume referrers, or incentivize low-volume referrers.

To read the complete advisory opinion, click here.

The Government Accountability Office (“GAO”) published a report in September 2012 indicating that providers who self-referred patients for MRIs, CTs, and PET services cost Medicare about $109 million more in 2010 than it would have if the patients obtained the services from entities that did not employ, and were not owned by, the referring physician.

The GAO report argues that financial incentives are a major factor for the increase in the number of advanced imaging services ordered, based on the finding that providers who purchased or leased imaging equipment, or who joined practices that self-referred, substantially increased their referrals for MRIs and CTs. For example, the number of self-referred MRI services from 2004 through 2010 increased more than 80%, while the number of self-referred CTs during the same time period more than doubled.

As a result of the findings in the report, the GAO calls for a modifier “flag” that would be required on the submission of claims that involved a self-referred advanced imaging service. The GAO also proposed a payment reduction for self-referred advanced imaging services. The policies of the Centers for Medicare and Medicaid Services that restrict physician self-referrals were noted by the GAO as having a positive effect in reducing the utilization of the imaging services.

The GAO report is an indicator of the government’s persistence in detecting, monitoring, and curtailing certain types of referrals that the government perceives as abusive. This confirms the trend of increasing reviews and investigations into a physician’s referral patterns.

To read the full report, click here.