Physician Compensation

The U.S. Court of Appeals for the Third Circuit recently issued a False Claims Act (FCA) decision calling into question productivity-based physician compensation structures under the Stark Law, in reliance on a controversial interpretation of the Stark Law’s “volume or value” standard.

The case, U.S. ex rel. Bookwalter v. UPMC, involved employment arrangements between the University of Pittsburgh Medical Center’s (UPMC) subsidiary physician practice entities and neurosurgeons who performed procedures at UPMC’s affiliated hospitals.  The decision is significant for hospitals and health systems in that the Third Circuit’s holding is contrary to guidance promulgated by the Centers for Medicare & Medicaid (CMS) and appears to call into question a common compensation methodology used by health systems to compensate physicians.


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In the recent past, the government has racked up a number of FCA settlements based on alleged violations of the Anti-Kickback Statute (AKS).  This focus undoubtedly will remain a high enforcement priority.

In U.S. ex rel. Williams v. Health Management Associates Inc. and U.S. v. Atlanta Medical Center, Inc., Tenet Healthcare Corporation and two of its Atlanta-area hospitals, Atlanta Medical Center and North Fulton Hospital, agreed to pay more than $513 million to resolve civil and criminal allegations of AKS and FCA violations.  Between 2000 and 2013, Atlanta Medical and North Fulton allegedly paid prenatal clinics for referring patients, many of whom were undocumented and indigent, to its labor and delivery, postnatal and infant services.  Using sham contracts, the hospitals allegedly paid the clinics for unnecessary, duplicative or substandard translation services, which in certain cases were not actually provided.  Tenet allegedly concealed the underlying purpose of the contracts from its legal counsel and violated the terms of its previously-entered CIA with HHS-OIG, which related to a 2006 settlement for $900 million to resolve allegations of fraudulent billing and AKS violations.


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