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OIG Issues Favorable Opinion Regarding Payment of Per Diem Fees to Physicians in Emergency Department

On October 23, 2012, the U.S. Department of Health and Human Services, Office of Inspector General (OIG), issued a favorable Advisory Opinion (Opinion 12-15) regarding the payment of per diem fees by hospitals to physicians providing on-call coverage to unassigned patients who presented to the hospital’s emergency department. In its Opinion, the OIG advised that under the federal Anti-Kickback Statute, neither civil monetary penalties nor administrative sanctions would be imposed on the parties involved with the arrangement at issue.

Specifically, the arrangement at issue involved a charitable, tax-exempt hospital which operated its own emergency department on a 24/7 basis. As to those patients treated in the ED, approximately 19% were treated without compensation given to the hospital, while services rendered to the remaining 81% were reimbursed through some form of insurance, including federal health care programs. The ED was staffed by 130 specialist physicians who pursuant to a written agreement, provided unrestricted call coverage within the hospital. The agreement required the physicians to respond within thirty minutes of a call, regardless of whether they were on-site or elsewhere. In addition, the physicians were required to provide appropriate follow up care and other services in their office practices for any patients who they themselves admitted.

As payment for the physicians’ on-call services, the hospital created a per diem fee system pursuant to an analysis of various factors related to the physicians’ respective call burdens. These factors included the number of days per month the physicians would likely be called, the number of patients per call day they were likely to see, and the likely number of patients requiring inpatient and follow up care. Based on these factors, a total call coverage payment would be allocated and then divided by 365 to determine the per diem fee paid by the hospital to each individual physician.

The federal Anti-Kickback statute makes it a crime to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce or reward referrals of services which are reimbursable by a federal health care program, such as Medicare or Medicaid. That said, there are several provisions under the statute which protect arrangements that fit within certain parameters, commonly referred to as “safe harbors.” Notably, the safe harbor pertinent to the arrangement at issue was identified by the OIG as one encompassing “personal services and management contracts.”

In deeming the arrangement at issue to have a “low risk” of fraud and abuse, the OIG took into account several factors. For example, the hospital had certified that its total call coverage payment allotment had been reviewed by an independent consultant, who in turn had certified that the coverage was commercially reasonable, consistent with the applicable fair market value, and independent of volume and/or value of referrals. The hospital had also certified that the physicians’ per diem fees were applied uniformly and were not dependent or based on the referral patterns of individual physicians. Noting the validity of the payments themselves, the OIG also determined that every year, the payments were calculated and allocated in advance, and were ultimately distributed independent of individual referral patterns. Finally, with regard to the services provided by the physicians, the OIG determined that such services were “actual and necessary,” and that the majority of them were paid for solely by the per diem payment allocated by the hospital.

Its opinion notwithstanding, the OIG noted several qualifications to its ruling, advising that its opinion was limited in scope to the specific arrangement at issue, could not be relied upon by any other individual entity, and was limited solely to the federal Anti-Kickback statute (as opposed to other state or federal laws).

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