In some states, the CPOM prohibition limits the types of compensation arrangements that are permissible between MSOs and physician practices. For example, New York prohibits physicians from entering into a "fee splitting" compensation arrangement with an MSO, where the MSO is compensated based on a percentage of the physician practice's income or receipts. In all cases, however, compensation paid to an MSO must be fair-market value for the services provided by the MSO.
What are compliance risks associated with MSO arrangements?
Failing to comply with CPOM rules can, among other consequences, subject physicians to potential discipline by the applicable state licensing board for aiding/abetting the unauthorized practice of the medicine. Non-compliant arrangements can also result in the denial of reimbursement or recoupment of fees previously paid to the physician practice by third-party payors. Some states also impose fines on parties involved, or aiding/abetting the unauthorized practice of medicine.
In addition to the CPOM prohibition, physicians and MSOs must be mindful of federal and state laws (including the federal Anti-Kickback Statute and state law equivalents) that prohibit improper compensation and ownership arrangements between health care providers and actual or potential referral sources. Compliance risks with respect to these laws are especially heightened if MSO agreements contain certain red flags, including the following.
•If the MSO performs marketing or referral procurement services;
•The MSO arrangement is exclusive (i.e., the physician practice cannot hire a different MSO); or
•If the MSO's compensation is directly or indirectly related to referrals or revenues generated by a physician practice.
Whether an arrangement complies with such laws is based on the particular facts and circumstances and is determined on a case-by-case basis.
Leonard Lipsky is a Member of the Firm in the New York office, and Yulian Shtern is an Associate in the Newark office, of Epstein Becker & Green, P.C., a national law firm with a primary focus on health care and life sciences.