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Worth the read: Recent HHS-OIG advisory opinion


The opinion concerns a proposal to pay bonuses to its employed physicians based on net profits derived from certain procedures performed by the physicians.

gavel and stethoscope | © yavdat - stock.adobe.com

© yavdat - stock.adobe.com

Simply stated, “[p]ursuant to section 205 of the Health Insurance Portability and Accountability Act of 1996 (HIPAA), Public Law 104–101, codified at section 1128D of the Social Security Act (Act), the Secretary must publish advisory opinions regarding the application of the Federal anti-kickback statute and the safe harbor provisions, as well as certain other administrative sanction authorities, to parties’ proposed or existing arrangements.”

For those unfamiliar with U.S. Department of Human of Health and Human Services Office of the Inspector General’s (HHS OIG) advisory opinions, an advisory opinion may be requested with regards to the following:

  1. What constitutes prohibited remuneration under the Federal anti-kickback statute;
  2. Whether an arrangement or proposed arrangement satisfies the criteria in section 1128B(b)(3) of the Act, or established by regulation (i.e., safe harbors), for activities which do not result in prohibited remuneration;
  3. What constitutes an inducement to reduce or limit services to Medicare or Medicaid program beneficiaries under section 1128A(b) of the Act; and
  4. Whether an activity or proposed activity constitutes grounds for the imposition of sanctions under sections 1128, 1128A or 1128B of the Act.

Importantly, the respective advisory opinion only applies to the person requesting the opinion. Recently, HHS OIG issued Advisory Opinion No. 23-07. The “Proposed Arrangement” was found favorable (not to say that it cannot be reversed by the OIG at a later date) and is premised on the request to evaluate a “proposal to pay bonuses to its employed physicians based on net profits derived from certain procedures performed by the physicians.” Here are some key take-aways of the proposed arrangement and the OIG’s Opinion:

  • A multi-physician practice and the Physician Employees do not have a separate ownership interest in the ambulatory surgery center (ASC);
  • Under the Proposed Arrangement, the entity “proposes to implement an employment compensation bonus methodology for each of the Physician Employees, in addition to their based employment compensation, which would be in exchange for the services they provide on behalf of Requestor (including services for which payment may be made under Federal health care programs);
  • Requester did not request and the OIG did not opine on compensation to Physician Employees outside of the Proposed Arrangement;
  • The OIG concluded that the bonus compensation under the Proposed Arrangement would be protected by the statutory exception and regulatory safe harbor for employees because: (i) Requestor certified that the Physician Employees would be bona fide employees of Requestor in accordance with the definition of that term set forth at 26 U.S.C. § 3121(d)(2); and (ii) the bonus compensation would constitute an amount paid by an employer to an employee for employment in the furnishing of any item or service for which payment may be made in whole or in part under Medicare, Medicaid, or other Federal health care programs. (emphasis added).

They key, a safe harbor was met as available under the AKS. Notably, the OIG expressly stated that “a similar arrangement involving bonus payments to independent contractor physicians or other nonemployees or under a different corporate structure (in which, for example, the physicians were owners of the ASCs and paid themselves the bonuses contemplated by the Proposed Arrangement as ownership distributions) may raise fraud and abuse concerns.”

All that glimmers is not gold. Entities and lawyers alike should take note that a safe harbor was met in this instance. And, if one is not met, the barn door is open for enforcement action, whether directly through the OIG or a False Claims Act case.

Rachel V. Rose, JD, MBA, advises clients on compliance, transactions, government administrative actions, and litigation involving healthcare, cybersecurity, corporate and securities law, as well as False Claims Act and Dodd-Frank whistleblower cases.

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