Don’t let charity become kickback test case

Pressuring physicians to donate could lead to stiff civil monetary penalties from OIG

If your hospital is pressuring its physicians or vendors to donate to the hospital's charitable foundation, you could end up as a test case for the OIG. That's because even something that seems innocuous, like charitable donations, could be construed as a kickback arrangement, says attorney Tom Watkins at Watkins Boulware Lucas in St. Joseph, MO.

The Office of the Inspector General already has warned hospitals not to abuse their charitable status, notes Tom Greeson, an attorney at Hazel and Thomas in Falls Church, VA. And Greeson believes the agency will be prosecuting more kickback cases now that Congress has given it authority to levy administrative penalties for kickbacks, rather than having to go through lengthy criminal trials that either mean jail or exclusion for providers.

Now, OIG simply can threaten to impose administrative penalties of up to $50,000 plus triple damages per violation — an option that providers might be loathe to fight when the alternative is long, expensive days in court. OIG hasn't exercised its new authority yet, but experts say there's little doubt it will, soon enough.

Critics say hospital-based physicians often find themselves pressured to offer donations to hospitals whose motives are less than charitable. "This happens a lot more than people will admit," says Neil Caesar, an attorney in Greenville, SC. Hospital-based physicians are especially vulnerable, particularly specialists such as radiologists who depend on the hospital for referrals, Greeson says. For example, a hospital might indicate that its exclusive contract with a specialist might be awarded to another doctor if a target for donations isn't met.

In itself, there's nothing wrong with a hospital soliciting donations for its foundation. But telling a vendor or a physician that getting or keeping a contract hinges on whether it makes a donation — even to the noblest of causes — could violate the anti-kickback statute.

"It's one of those things where there doesn't seem to be much of a victim, except for the vendor," notes Watkins. "But the vendor really is a victim. Yet it won't say anything because it wants to keep the business."

Unfortunately, while those who feel obligated to pay kickbacks may consider themselves victims, anyone who solicits or pays to get business could be found guilty of violating the statute.

This is an issue that every hospital's compliance plan should address, warns Watkins. First, marketing materials the hospital uses to solicit donations should be the same for all potential donors, regardless of whether they're vendors or local philanthropists. In addition, the hospital's purchasing agent, or anyone else who has authority over contracts, should not be involved in seeking donations.

Also, hospitals must make clear that there will be no retribution if donations aren't made, Greeson says. Requests for contributions should be given to all groups. In addition, dollar targets for raising funds should be overall rather than separate for each individual group.

As for physicians, Caesar suggests they use one negotiating tactic to nip coercion in the bud: "Just tell the hospital that your lawyer says this isn't a good idea. And then ask them what their lawyer thinks."