Use of Consulting Physicians/Medical Directors: Frequently Asked Questions

The following article answers frequently asked questions about relationships with Medical Directors.

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Elizabeth E. Hogue, Esq.
(877) 871-4062
Use of Consulting Physicians/Medical Directors: Frequently Asked Questions
Relationships with consulting physicians/medical directors are extremely useful. Many providers already understand that if consulting physicians/medical directors also make referrals to the provider, the requirements of both the Stark law and regulations and the anti-kickback statute, and exceptions or so-called “safe harbors” must be met.
Among other requirements, the Stark laws and regulations and the anti-kickback statute require providers to sign written agreements with physicians who provide consulting physician/medical director services and make referrals to the same providers. 
The basic requirements that must be met are as follows:
  • Enter into written agreements with physicians that are signed by providers and physicians, which specify the services covered by the arrangement.
  • The arrangement must cover all of the services to be furnished by referring physicians to providers.   
  • Aggregate services provided do not exceed those that are reasonable and necessary for the legitimate business purposes of providers.
  • The term of each arrangement is for at least one year. 
  • Compensation paid over the term of the agreement must not exceed fair market value and must not be determined in a manner that takes into account the volume or value of any referrals or other business generated between the parties.
  • The services to be furnished under each arrangement do not involve the counseling or promotion of a business arrangement or other activity that violates any State or Federal law.           
Providers frequently have the following questions about these requirements:
Can I use a “sample agreement?”
No, providers who use “sample agreements” clearly risk non-compliance with potentially serious consequences. First, although the federal requirements described above apply to all providers, many states have implemented statutes and/or regulations that impose additional requirements on providers and physicians who establish these types of relationships. Because the laws vary from state to state, “sample agreements” will not reflect these requirements and are likely to be non-compliant.
In addition, the services to be provided by physicians should vary from physician to physician and must be carefully described so that they comply with the above requirements. “Sample agreements” cannot provide the careful language that is required.
Can I pay physicians a flat monthly amount?
Physicians frequently say that they want a certain amount of compensation per month. The Stark regulations, however, are quite clear that there are only two ways to pay physicians:
  1. Per hour or
  2. Per unit of service
The use of a formula for payment based upon units of service appears to allow providers to pay a flat fee for actual participation in each of a variety of meetings such as Professional Advisory Board (PAB) meetings, if home health agencies elect to continue these meetings, team meetings, case conferences, interdisciplinary team meetings, and ethics committee meetings.
But the best practice is to pay per hour. This practice will alleviate any questions about whether payments are at fair market value.
Providers must also be careful that they do not “back into” amounts paid to physicians. If, for example, physicians demand $3,000.00 per month, providers should not respond by saying that they will make sure physicians get enough hours at an established hourly rate to at least equal this amount. Instead, the amounts paid to physicians are likely to vary considerably each month if providers are in compliance with the above requirements, including payment for services only if they are really needed.
What documentation do I need from physicians each month in order to pay them for their services?
According to the Office of Inspector General (OIG) of the U.S. Department of Health and Human Services (HHS), the burden of documenting services provided by consulting physicians is on providers. Physicians must submit invoices that include the date that they provided services, a description of the services provided, and the amount of time spent on each activity. Providers must review this documentation prior to making payments to physicians in order to help ensure compliance with applicable requirements. If there are entries that just do not make sense, they must be revised before payments are made.
If, for example, physicians are reviewing patients' medical records, it is not unusual to see invoices that indicate that the same exact amount of time was spent on each chart. If enforcers see entries like these, their likely response is, appropriately, “Impossible!” It is simply not possible that physicians spent exactly the same amount of time on each chart. The documentation is, therefore, clearly suspect.
Instead, physicians must document the actual amount of time they spend on each activity. If “nailing down” this issue is problematic, providers could ask physicians to document the time they actually began each activity and the time they completed each activity.
There are many legitimate reasons for providers to use the services of consulting physicians/medical directors who also make referrals to them. Compliance with all applicable requirements is absolutely essential.
©2021 Elizabeth E. Hogue, Esq. All rights reserved.
No portion of this material may be reproduced in any form without the advance written permission of the author.
Elizabeth E Hogue LLC | 1300 I Street, NW, Suite 400E, Washington, DC 20005


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