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Certain physician recruitment and retention activities found to be suspect.

A new "Fraud Alert" from the Office of Inspector General of the Department of Health and Human Services will cause hospitals to be especially circumspect in their dealings with actual and potential members of the medical staff. The authors analyze the alert and its potential impact on hospitals and physicians. "Health Law" is a regular feature of Physician Executive contributed by Epstein Becker & Green. Mark Lutes of the firm's Washington, D.C., office serves as editor for the column.

On May 7, 1992, the Department of Health and Human Services (HHS) Office of Inspector General (OIG) released a Special Fraud Alert addressing financial incentives offered by hospitals and other health care facilities to recruit and retain physicians. The Fraud Alert enumerates current recruitment and retention practices that OIG finds to be suspect under the Medicare/Medicaid antikickback statute and warns that such practices may be subject to prosecution. Although the Fraud Alert appears to be directed at hospitals that offer recruitment incentives, exposure to liability under the antikickback statute extends to both hospitals and physicians who benefit from recruitment or retention incentives.

The list of suspect activities ranges widely, from those long considered to be flagrant violations of the statute, such as payments to physicians for each patient referred to a hospital, to fairly typical physician "perks," such as payment for continuing medical education courses and travel to conferences, as well as training for physician office staff in medical coding. Other suspect arrangements listed include free or significantly discounted office space or equipment, free or significantly discounted billing services, income guarantees, low-interest loans, and inappropriately low-cost physician coverage in hospital group insurance plans.

This "broad brush" treatment provides no distinction as to which activities are considered more egregious than others. Such a lack of distinction is likely to confuse and alarm many hospitals and physicians and also fails to provide useful guidance to the health care industry.

Moreover, the Fraud Alert fails to make clear that some of the enumerated activities may qualify for protection if offered to physician employees. In particular, the employee exception under the antikickback statute protects payments made by an employer to an employee who has a bona fide employment relationship with the employer for the provision of Medicare- or Medicaid-covered items or services. Presumably, incentives offered to physician employees should be immune from prosecution, but the Fraud Alert does not so state.

The Fraud Alert also fails to recognize that many socalled "incentives" identified in the Fraud Alert benefit not only the physician, but also the offering hospital. For instance, physician training in CPT coding procedures may enable hospitals to bill Medicare properly for patients who receive outpatient services at the hospital. Similarly, payment to physicians for continuing medical education ensures that physicians on the medical staff maintain appropriate skills, and thus may be a significant risk management tool for hospitals.

Even more troubling is that the Fraud Alert does not distinguish between benefits offered to retain existing medical staff members on the one hand and to recruit new medical graduates and physicians from different geographic areas on the other hand. Benefits aimed at the latter group of physicians, who are not sought for their existing patient base but, rather, for their medical expertise, have long been viewed as a necessary and proper component of hospital activities and have been expected to receive eventual safe harbor treatment. Indeed, hospitals and physicians generally have come to rely on the OIG's informal recognition of a significant distinction between the recruitment of physicians who are new to a geographical area, to an area of specialty practice, or to practice in general, in contrast to the retention of existing practitioners in the community.

Such a distinction was drawn in the language of a proposed safe harbor draft addressing physician recruitment that was informally released by the OIG to the health care industry several years ago. This proposed safe harbor would permit an entity to provide benefits to a physician to induce that physician to establish staff privileges at a health care facility. Protection from antikickback liability would be limited to a physician who is relocating and starting a new practice or who has been practicing within his or her current specialty for less than one year. In the preamble to the final safe harbor regulations, published July 29, 1991, HHS specifically stated that It was considering a new safe harbor provision for practitioner recruitment because of the need to protect some recruitment activities for physicians. Thus, it is clear that such a safe harbor has been contemplated.

The Fraud Alert does include a footnote that states that HHS is considering a new safe harbor that would grant protection for certain hospital incentives for physicians starting a new practice. However, the Fraud Alert states definitively that "such a concept would have no legal effect whatsoever until promulgation as a final regulation." Thus, until this safe harbor is published in final form, hospitals will not have any formal guidelines from the OIG regarding the scope of legitimate physician recruitment activities and will have only the Fraud Alert to rely on for guidance.

The broad language of the Fraud Alert also raises concerns about how the Internal Revenue Service, which has provided past guidance on physician recruitment activities that is not necessarily consistent with the Fraud Alert, will henceforth view physician recruitment and retention by hospitals. In recent months, through a variety of pronouncements and publications, the IRS has been moving closer to OIG's positions on fraud and abuse in connection with the IRS' analysis of private inurement/private benefit concerns in hospital-physician relations. It is anticipated that a General Counsel Memorandum will be published soon that addresses physician recruitment and retention from the IRS standpoint. This new IRS statement could prove to be very important for many hospitals and physicians as the IRS implements its new audit guidelines for exempt organizations. The IRS also is expected to examine hospital/physician agreements that provide incentives to determine if there is proper reporting of physicians' income tax liability.

Given the Fraud Alert's extremely broad approach, and until further clarification is obtained through the promulgation of additional safe harbor regulations, physicians can expect hospitals to be engaging in careful scrutiny of their recruitment and retention programs.

Carrie Valiant, Esq., and Rebecca Roberts, Esq., are health care attorneys at the law firm of Epstein Becker & Green, P. C.
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Title Annotation:Health Law
Author:Roberts, Rebecca
Publication:Physician Executive
Date:Jul 1, 1992
Previous Article:How physicians can create their future.
Next Article:But it has a CPT code.

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