The Office of Inspector General ruled a shared medical practice with 23 physician and podiatrist investors poses little referral abuse risk.
This material originally appeared in the January 9, 2009, issue of Health Lawyers Weekly, a publication of the American Health Lawyers Association (www.healthlawyers.org).
The Department of Health and Human Services Office of Inspector General issued a favorable advisory opinion, posted January 7, to a shared medical practice with 23 physician and podiatrist investors.
Although the practice did not satisfy the investments in group practices safe harbor under the Anti-Kickback Statute because one physician investor held a 1 percent equity but did not treat patients at the practice, the OIG nonetheless found no “appreciable additional risks” of fraud and abuse given the totality of the facts and circumstances certified by the requestors.
In deciding that administrative sanctions would not be warranted under the scenario described in the opinion, OIG stressed among other things the requestors’ certifications that they have or will shortly achieve compliance with the group practice definition of the physician self-referral (Stark) law.
The practice at issue is a limited liability company that was formed by 23 investor physicians and podiatrists. The practice, located in a rural Health Professional Shortage Area, includes physician consultations on a walk-in urgent care basis and various clinical laboratory and diagnostic radiology services, according to the opinion.
With the one exception noted above, which precludes application of the investments in group practices safe harbor, all equity interests in the practice are held by licensed physicians and podiatrists who treat patients at the practice.
OIG said the absence of safe harbor protection was not fatal, however, noting the practice otherwise complied with the safe harbor “in nearly all respects.”
Reviewing the “totality of the facts and circumstances,” OIG emphasized that all equity interests are held as a fixed percentage stake in the entire practice, rather than in particular specialty groups or other subdivisions.
In addition, each investor shares in the entire enterprise’s risks and returns, directly proportionate to their individual stake in the practice.
“As described in the facts, the Practice is structured and operated as a unified business. For example, central decision-making authority rests with the Board, which determines both clinical and financial policies. Expenses and revenues are pooled across the enterprise and are not separated in relation to satellite offices maintained by individual Practice members,” OIG observed.
Requestors also certified that the practice would fully comply with the requirements of the “group practice” definition under the Stark law and that revenues from ancillary services are derived from “in-office ancillary services” that meet the definition of the term under the physician self-referral law.
Moreover, the one stakeholder who did not treat patients at the practice provided substantial services integral to its operation and administration, “thus minimizing the risk that his small equity interest reflects referrals.”
Advisory Opinion No. 08-24 (Dep’t of Health and Human Servs. Office of Inspector Gen. Dec. 29, 2008).