Improper Management Agreements Serve as Basis for $10 Million Dollar Settlement

The Department of Justice (DOJ) released a statement on March 31, 2015 discussing a recent settlement agreement with Robinson Health System, Inc., based in Ohio.

The settlement arose from allegations that the health system had violated both the Anti-Kickback Statute and the Stark self-referral prohibition by entering into management agreements with physician groups who allegedly did not provide sufficient bona fide management services to justify the amount of the payments.

This settlement is a good reminder to physician groups and other health care providers to exercise caution when entering into management agreements with entities to which they refer patients. Although it is not mentioned in the press release, it is important to note that Anti-kickback liability can go both ways – to the recipient of the money as well as the entity paying the improper remuneration.
Management agreements should be structured to meet the Stark exception and the Anti-kickback safe harbor for personal services/management agreements, which contain multiple technical requirements.

One key requirement in both the exception and the safe harbor is the requirement that the services be “reasonably necessary” for a legitimate business purpose. In other words, physicians should only be paid for services that are needed and which are actually being performed. Another key requirement in both the Stark exception and the AKS safe harbor is the requirement that payments are fair market value for the actual services that are performed.

More information on the Stark Self-Referral Law can be found on the CMS Physician Self Referral website. Information on the Anti-kickback statute safe harbors can be found on the OIG Compliance Website.

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