July 27, 2016

Are the Holiday Baskets Really Worth the Risk?

From international law firm Arnold & Porter LLP comes a timely column that provides views on current regulatory and legislative topics that weigh on the minds of today's physicians and health care executives.

The recent report of a settlement between a large physician practice and the Office of Inspector General (OIG) of HHS reminds us once again that providing perks, even seemingly insignificant perks, to referral sources can be problematic and costly to physicians and physician practices. According to the posting on the OIG website, the practice self-disclosed certain payments made to referral sources and agreed to pay $50,000 for allegedly violating the Civil Monetary Penalties Law provisions applicable to physician self-referrals and kickbacks. OIG alleged that the practice provided improper remuneration in the form of holiday gifts, consisting primarily of candy and other small food items, to physicians and physician practices who were referral sources. While the government apparently did not take action under the federal Anti-Kickback Statute or the Stark Law in this case, gifts to referral sources also may trigger liability under these provisions and can give rise to issues under the False Claims Act, all of which carry the possibility of very significant penalties, including criminal penalties, against the entity providing the gifts as well as the recipient of the gifts.

The Civil Monetary Penalties Law authorizes the imposition of substantial civil money penalties against an entity that engages in activities including, but not limited to, knowingly or willfully soliciting or receiving remuneration for a referral of a federal health care program beneficiary (42 U.S.C. § 1320a-7a). The penalties may vary based on the type of violation at issue. For example, in a case of false or fraudulent claims, the OIG may seek a penalty of up to $10,000 for each item or service improperly claimed, and an assessment of up to three times the amount improperly claimed (42 U.S.C. § 1320a-7a(a)). In a kickback case, the OIG may seek a penalty of up to $50,000 for each improper act and damages of up to three times the amount of remuneration at issue, regardless of whether some of the remuneration was for a lawful purpose (42 U.S.C. § 1320a-7a(a)).

It can be difficult to distinguish between a gift provided to a referral source that potentially violates the law versus those that really are innocuous. Certainly, gifts given with the intention of securing referrals, building your practice or maintaining loyalty from a referral or potential referral source, carry risk of running afoul of both the Civil Monetary Penalties Law and the Anti-Kickback Statute. Under the Stark Law, an entity that furnishes designated health services— such as a hospital or a physician practice that provides designated health services (eg, clinical labs, imaging) — that has a financial relationship with a physician, is prohibited from billing for services arising from referrals from that physician, unless an exception affirmatively permits it. "Financial relationships" under Stark are defined broadly, which means that all remuneration from a designated health services entity to a physician must be considered, including in-kind compensation such as meals, gifts, etc. Fortunately, the Stark Law regulations provide an exception for nonmonetary compensation up to an aggregate amount of $392 for calendar year 2016. (42 C.F.R. § 411.357(k)). To qualify for the exception, the size of the nonmonetary compensation may not take into consideration the volume or value of referrals from the gift recipient, the compensation may not be solicited by the recipient, and the compensation may not violate the Anti-Kickback Statute. Thus, a gift within the dollar limit of the Stark Law given to a referral source with improper motivation could still subject a physician practice to Anti-Kickback Statute scrutiny.

While it is not possible to know if there were facts surrounding the practice's giving that made the gifts particularly troublesome, the settlement leaves us questioning whether any gifts are worth this risk. The practice seems to have paid a hefty price ($50,000 penalty) for some candy, and we would hope that its referral sources were sending patients to the practice because of the quality of care it provides and not in return for the treats. Perhaps instead of buying holiday baskets this year, your practice should consider using the money saved to make a donation to a local community charity. Hopefully, your peers in the medical community would be willing to take a pass on a few extra holiday calories for those in need.

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