On-Call Arrangement with Nonprofit Hospital Does Not Violate the Anti-Kickback Statute

In an advisory opinion dated September 27, 2007, the Office of the Inspector General (OIG) found that an on-call coverage and uncompensated care arrangement between physicians in various specialties and a nonprofit, charitable hospital would not constitute grounds for the imposition of sanctions or civil monetary penalties under the Anti-Kickback Statute. The hospital at issue is a tax-exempt, nonprofit medical center with a charitable mission to provide indigent medical care. The hospital operated an emergency department (ED) that remained open at all times. As required by state law, the hospital was required to accept patients regardless of their ability to pay. Nearly one in four patients presenting to the ED had no health insurance. As a result, the financial burden caused by these uncompensated patients depleted the local supply of physicians willing to provide on-call coverage and inpatient follow-up care at the ED. In response, the hospital formed a committee to study the problem. Based on the committee’s recommendations, the hospital developed an arrangement with its on-call physicians. Under the arrangements, the physicians were required to (1) participate in call rotation; (2) participate in inpatient and consultative services regardless of a patient’s ability to pay; (3) provide timely response to ED calls; (4) cooperate with care management/risk management and quality initiatives and (5) document their services in timely medical records. Physicians participating in the arrangement were paid a per diem rate for each day spent on-call at the ED, except for one and a half days each month that each physician was required to contribute gratis. The per diem rate was based on two factors: physician specialty and whether the on-call coverage was on a weekday or weekend. In turn, the difference in the per diem rates among the various physician specialties was based on the following factors: (1) severity of the illness; (2) the physicians’ likelihood of having to respond when on-call; (3) the physicians’ likelihood of having to respond to a request for inpatient consultative services for an uninsured on-call patient and (4) the degree of inpatient care typically required of the physician’s specialty. In analyzing this arrangement for potential violation of the Anti-Kickback Statute, the OIG focused on whether the arrangement fell within the personal services and management contracts safe harbor. Under this safe harbor, personal services and management contracts will be protected if they meet the following seven standards: (1) the arrangement is set out in writing and signed by the parties; (2) the arrangement covers and specifies all of the services to be provided; (3) if the services are to be performed on a periodic, sporadic or part-time basis, the arrangement exactly specifies the schedule, length and charge for the performance intervals; (4) the arrangement is for not less than one year; (5) the aggregate amount of compensation is set in advance, is consistent with fair market value and is not determined in a manner that takes into account the volume or value of any referrals; (6) the services performed under the agreement do not involve counseling or promotion of the business arrangement for which reimbursement is available under Medicare, Medicaid or other federal healthcare programs; (6) the services performed do not involve counseling or promotion of a business arrangement that violates federal or state law and (7) the aggregate services do not exceed those that are reasonably necessary. In examining whether the arrangement fell within this safe harbor, the OIG focused on the fact that the per diem rates paid by the hospital varied from month to month, and thus, the arrangement did not meet the fifth requirement of the personal services safe harbor under the Anti-Kickback regulations — that the compensation be set in advance. Consequently, the OIG examined the arrangement by taking into account the totality of the facts and circumstances and held that, for the three reasons discussed below, the arrangement presented a low risk of fraud and abuse. First, while the OIG did not examine whether the per diem rates were based on fair market value (the hospital had certified that they were), it pointed out that certain features of the rates supported the hospital’s certification. For instance, the per diem payments were tailored to reflect the financial burden on the physicians participating under the arrangement, as well as the likelihood that a physician in a particular specialty would be required to respond to an emergency while on call and the likelihood that the physician would have to provide uncompensated services. Moreover, the OIG focused on the fact that the physicians were required to meet certain obligations beyond the actual time spent on call. For example, the physicians were required to provide care to any patient seen while on call, including inpatient care, which required the physicians to furnish additional services without additional payment. (The physicians were also required to provide at least 18 days of service gratis and assume responsibility for additional paperwork.) Finally, the OIG found it significant that the per diem rates were administered uniformly for all doctors in a given specialty, without regard to the individual physician’s referrals to, or other business generated for, the hospital. Second, the OIG found that the hospital’s legitimate, unmet need for on-call coverage and uncompensated physician services lowered the risk that the arrangement was designed to funnel unlawful remuneration to physicians for referrals. Third, and finally, the OIG noted that the arrangement was offered uniformly to all physicians in the relevant specialties. This ensured that scheduling was not used to reward referrals. Also, the documentation requirements of the arrangement promoted transparency and accountability. In conclusion, this advisory opinion from the OIG provides comfort to hospitals who accept indigent patients into their EDs. Following this advisory opinion, hospitals can provide compensation to physicians in order to ensure that their EDs are properly staffed and operate efficiently. The OIG’s opinion may be found at http://oig.hhs.gov/fraud/docs/advisoryopinions/2007/AdvOpn07-10A.pdf November 2007