Employee Safe Harbor Protections Affirmed in Recent OIG Advisory Opinion

On October 10, 2023, the Department of Health and Human Services (HHS) Office of Inspector General (OIG) issued an advisory opinion reinforcing the broad protection of physician employees under the safe harbor provision of the Anti-Kickback Statute (AKS). The AKS is a federal criminal law which prohibits payment for the inducement or reward of patient referrals or generation of business where any item or service payable by a federal healthcare program is involved.  Remuneration under the law has been interpreted to mean “the transfer of anything of value, directly or indirectly, overtly or covertly, in cash or in kind.” Violation of the AKS can result in severe penalties, including imprisonment of up to 10 years, a maximum fine of $100,000, and exclusions from Medicare and Medicaid reimbursement.

There are several statutory and regulatory exceptions to the AKS, which allow for specific remuneration arrangements when certain criteria are met. One statutory exception protects payments made by employers to employees who are in bona fide employment relationships for providing covered items and services under the employment agreement. Similarly, safe harbor regulations have been promulgated by HHS which clarify that “remuneration” under the AKS does not include payments under the bona fide employer-employee relationship described above.

In the recent advisory opinion, the OIG considered whether employer payment of bonuses based on net profits to employed physicians in a multi-specialty ambulatory surgery center (ASC) would constitute a violation of the AKS. The employer practice operated two separate ASCs – noted to be divisions and not subsidiaries – and planned to compensate physician employees via a bonus structure where employed physicians who performed procedures at the ASCs would receive 30% of the practice’s net profits in addition to base employment compensation. The OIG concluded that this type of arrangement would not violate the terms set forth in the AKS.

In its analysis, the OIG noted that the AKS would not be implicated under this proposed arrangement because the physicians to be compensated were bona fide employees, and the bonus compensation structure would constitute lawful remuneration under statutory definitions and regulatory guidance. The OIG did note, however, that the AKS would be implicated if the relevant ASC procedures were referred to the practice by the physician employee. Furthermore, the OIG noted that bonus compensation structures could implicate fraud and abuse concerns under the AKS when they involve “independent contractor physicians or other nonemployees or under a different corporate structure (in which, for example, the physicians were owners of the ASCs and paid themselves the bonuses contemplated by the Proposed Arrangement as ownership distributions).”

This advisory opinion affirms the broad scope of safe harbor protections, especially as they relate to incentivized compensation structures and ASCs. Healthcare companies should take note that these compensation structures will likely implicate the AKS if they tie compensation to profits under services to patients who are referred by compensated parties or if they involve non-bona fide employer-employee relationships, such as independent contractors.

For over 35 years, Wachler & Associates has represented healthcare providers and suppliers nationwide in a variety of health law matters, and our attorneys can assist providers and suppliers in understanding new developments in healthcare law and regulation. If you or your healthcare entity has any questions pertaining to fraud and abuse or healthcare compliance, please contact an experienced healthcare attorney at 248-544-0888 or wapc@wachler.com.