Fed-proof your hospital consulting agreements
Fed-proof your hospital consulting agreements
The recent convictions of two physicians in Kansas City on charges of violating the anti-kickback statute underscore the need for physician practices to scrutinize their consulting agreements with local hospitals, experts say.
In the Kansas City case, the physicians are facing jail time after being convicted of participating in a kickback scheme that netted them more than $1.5 million over a ten-year period. According to federal prosecutors, an area hospital paid the physicians $75,000 per year in thinly disguised "consulting fees" in exchange for referring Medicare and Medicaid patients.
To make sure your consulting agreements don't raise eyebrows at the Office of the Inspector General or Department of Justice, it's important first not only to review the contract but to recall why you entered into the contract in the first place, says Lee Hamel, JD, a health care attorney in Houston. Refresh your memory by also reviewing any notes or drafts you may have kept, Hamel recommends.
"Paper serves as a permanent reflection of what was in one's mind," he says. "And the articulation later on of what the physician intended may be quite different from what surfaces in notes and correspondence." Above all, make sure that the original intent and purpose of the consulting agreement is still being carried out. If things have changed, seek legal advice on whether the actual performance of the contract — not just what's on paper — is consistent with federal law.
It's particularly important to make sure the contract you entered into still reflects fair market value for the services you're providing to the hospital. "This is a particularly acute problem if the contracts are renewed from time to time without reevaluating the fairness of the exchange," Hamel says. "There's a tendency just to renew a contract, redate it, and re-sign it, and not focus too much on whether the circumstances have changed in such a way that the consideration is now excessive."
Similarly, it's necessary to re-evaluate on a regular basis whether the services you're providing to the hospital are really necessary. "It's not enough just to cook up some services that might be of some benefit to the hospital but are really just a pretext for covering a compensation method to the physicians for patient referrals," Hamel says.
Also, don't rely on the hospital's attorneys to keep you out of hot water. If for some reason you weren't represented by counsel when the contract was drawn up, get legal counsel now, before you review the arrangements. If you've disclosed all the material facts of your case to a competent attorney, relied on advice from that attorney in formulating your agreement, and held up your end of the contract, then you've got an "advice of counsel" defense that can help blunt allegations of criminal intent if there's trouble later on.
In evaluating your consulting agreements, Hamel offers the following rule of thumb: If you had to explain your actions to an OIG investigator — or, worse yet, a jury of your peers — could you articulate a reasonable, sound argument supporting the need for your consulting services? Could you show that your efforts were substantial and deserved to be compensated according to the terms laid out in the contract? "If a physician has trouble answering those questions, he probably ought to rethink the relationship," Hamel says.
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