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Physician Referral Programs Hold Revenue Potential and Pitfalls

Karen Minich-Pourshadi, for HealthLeaders Media, May 7, 2012

For instance, in September 2011, Whidbey Island Public Hospital District in Coupeville, WA, agreed to pay $858,571 for allegedly violating the Civil Monetary Penalties Law provisions related to physician self-referrals and kickbacks. The OIG alleged that WIPHD had over 100 violations surrounding various physician contracts and arrangements, including: (1) several expired hospitalist contracts and new, unsigned contracts; (2) no written agreements in place for many medical staff leadership and call coverage arrangements; and (3) a variety of improper lease arrangements, personal service arrangements, and malpractice subsidies for physicians, and a housing allowance and an equipment loan for one physician.

Another fine was the $1,216,511 that St. Elizabeth Medical Center in Covington, KY, agreed to pay in November 2010 after self-disclosing improper conduct to OIG that it discovered had occurred at another hospital with which it merged. OIG alleged that "St. Elizabeth entered into an improper billing arrangement for 'provider-based services' involving a rural outreach program that had occurred at another hospital prior to its acquisition by St. Elizabeth. In addition, the OIG alleged that the acquired hospital entered into several improper financial relationships with a referring physician that violated the Stark Law and the Anti-Kickback Statute."

A common mistake hospital or health systems make when it comes to referral programs is not fitting a physician compensation arrangement within an HHS Safe Harbor category, explains Thomas Barker, a partner at Foley Hoag, LLP in Washington, D.C., and former acting general counsel for HHS.

"Many of the violations [cited above] could've potentially fit into a safe harbor if the arrangement was drafted correctly," he adds.

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