Corporate Practice

PPMs Have More Than Financial Troubles

Copyright 1998, Physician's Financial News. Reprinted with permission.

Beyond financial woes, PPMs may have even more pressing issues. In May, the Office of Inspector General (OIG) of the U.S. Department of Health and Human Services said the nearly universal PPM practice of paying affiliated practices on a percentage basis of physician revenues may be an illegal kickback.

An advisory opinion (OIG Management Advisory Opinion 98-4) stated the percentage arrangements, typically about 10-30 percent of net revenue after expenses but before physicians salaries, may constitute fee splitting, punishable by criminal penalties, civil fines and exclusion from the Medicare program.

"Doctors who continue to practice under such agreements may risk loss of license. All parties could be subject to fines and/or imprisonment," says Christopher Rolle, a board certified healthcare attorney with Broad and Cassel in Orlando, FL.

Attorneys are scrambling to make sense of the opinion because hundreds of contracts may have to be amended to flat fee agreements. Contracts in New York, for example, which already has a strong fee splitting law, are flat fee.

"There is a concern doctors will use the opportunity to break contracts because of a perceived lack of support," says Chris McFadden, a healthcare research analyst with Wheat First Union in Richmond, VA. "It could turn the entire industry upside down."

The OIG said the arrangements give PPMs an incentive to increase revenues through patient referrals, using marketing services or their own specialist networks. They contain no safeguards against overutilization of provider networks and could induce firms to boost billing codes.

"The OIG didn't answer the questions but just put these agreements in doubt," Mr. Rolle said. "There has to be a test case on a national level. The Federal Government has to prove intent."

Almost all contracts provide for contract changes if the compensation arrangement turns out to be illegal says Richard Jacobs, a healthcare attorney at Holland & Knight in St. Petersburg, FL.

Comment
Now is the Time for EPs to Seek Independence

by Robert McNamara, MD FAAEM

AAEM members will recognize that the Academy has been ahead of the curve on this issue. This article confirms what we previously told you. If your contract stipulates a percentage take of your fee then the opportunity may exist for you to seek your independence. In fact, as stated above, you may be at serious risk if you do not restructure such an arrangement as fee-splitting may be prosecuted as a two-way street! This is similar to AAEM's concerns over closed books and the risk to you of fraud charges if you cannot see what is billed in your name.

The Academy has pointed out time and again that contract arrangements that force emergency physicians to give up a portion of their professional fee are likely to be illegal under the fee-splitting laws. Such arrangements are clearly suspect when the amount extracted is beyond "fair market value" for what is returned to the physician. The above adds further fuel to the fire of our argument in that many EM contracts stipulate a percentage take.

The time for complacency has long passed. You need to motivate yourself and your fellow "pit" doctors to take control of your work situation to create an ethical and legal practice environment. If you are in a potential fee-splitting situation you need to take this article to your hospital administrator and tell them you are concerned about your contract. Seek legal assistance remembering that if the compensation scheme in the contract is illegal, the included non-interference clause, restrictive covenants, lack of due process, and other onerous provisions are almost undoubtedly null and void.

If in such a situation, you need to grasp this opportunity and trust in your ability to become independent. When the large groups were forced to alter their contracts because of AAEM's victory on the HCFA reassignment issue, a number of your colleagues seized the opportunity. They refused to sign the new contract and won the contract themselves. It is not rocket science to set up your own group. Any of us can do this with the assistance of a reputable billing agent, attorney, and accountant. AAEM's contract guidelines can help steer you in this process. Carpe diem!