On October 23, 2012, the Office of Inspector General (“OIG”) issued a favorable response to a hospital’s request regarding its payment of per diem fees to various physician specialties in exchange for emergency department call coverage and related services. Based on the facts as certified by the hospital-requestor, the OIG concluded that, although the arrangement could violate the federal anti-kickback statute if the parties intended the arrangement to induce or reward referrals of federal health care program business, it would not impose administrative sanctions. While only the requestor may rely on this advisory opinion, it represents the third time the OIG issued a favorable Advisory Opinion regarding hospital pay for call arrangements. The OIG similarly reached favorable conclusions in Advisory Opinion No. 07-10 and Advisory Opinion No. 09-05.
In the Opinion, the requestor is a tax-exempt hospital that operates a full time emergency department. Under the arrangement, the hospital pays per diem fees to physicians to provide call coverage. The physicians on call are required to be available and respond to calls from the ED within 30 minutes and must provide follow up care, regardless of a patient’s ability to pay. The Hospital certified to the OIG that 19% of its patients seen in its ED receive uncompensated care, that it offers the arrangement to all specialists on its medical staff who are required to participate in call coverage, that it sets an annual allocation per specialty based on various “burden” factors, that it experienced shortages in the availability of physicians to take call, and that it monitors ongoing performance under the program. Based on an independent consultant’s review of the per diem rates, the requestor certified to the OIG that the rates are consistent with fair market value and do not take into account the volume or value of referrals or other business generated between the parties.
The OIG concluded that the arrangement fails to qualify for the safe harbor under the federal anti-kickback statute for personal services and management contracts because aggregate compensation is not set in advance (See Safe Harbor, 42 C.F.R. 1001.952(d)) In addition, the arrangement failed to precisely specify a schedule of part-time service intervals. Because the arrangement does not fit squarely within the safe harbor, the OIG analyzed the totality of the facts and circumstances to determine if the arrangement presents minimal fraud and abuse risk.
Just as it did in the previous Advisory Opinions, the OIG applied the following general “rule of thumb”:
“The general rule of thumb is that any remuneration flowing between hospitals and physicians should be at fair market value for actual and necessary items furnished or services rendered based upon an arm’s-length transaction and should not take into account, directly or indirectly, the value or volume of any past or future referrals or other business generated between the parties.” 70 Fed. Reg. 4858, 4866 (Jan. 31, 2005).
While the OIG generally recognized that hospitals may properly structure pay for call arrangements within the general “rule of thumb,” it also generally identified the same problematic compensation structures that it listed in previous opinions: (1) Arbitrary “lost income” compensation, (2) payment for no identifiable service, (3) aggregate on call payments disproprotionately high compared to regular practice income, and (4) payment for services for which the physician already receives separate reimbursement from payors or patients.
The OIG concluded that, overall, the arrangement presents a low risk of fraud and abuse for the following reasons:
- The requestor certified that, based on an independent valuation, the per diem rates are fair market value and the hospital meaningfully contemplated call burden to set rates;
- Uniform administration of per diem payments without regard to referrals or volume of business generated;
- Physicians required to provide actual and necessary services for which they are not otherwise compensated;
- The arrangement is offered on a consistent basis to all specialists who are required to take call; and
- Costs are not passed on to federal health programs.
The OIG was ultimately convinced that this arrangement contains sufficient safeguards to reduce the risk that the per diem fees are intended to generate referrals of Federal health care business.
For more information about ED call coverage or the Anti-Kickback and Stark rules in general please contact Adam Snyder.
