On Tuesday, October 10, 2023, the HHS Office of Inspector General (“OIG”) issued a favorable Advisory Opinion No. 23-07 (“Opinion”) vis-à-vis a bonus incentive plan for employed physicians (the “Proposed Arrangement”) and whether it would trigger liability under the Federal anti-kickback statute (“AKS”). The Opinion concludes that the Proposed Arrangement, if undertaken, would not generate prohibited remuneration under the AKS and, therefore, would not warrant sanctions under Sections 1128A(a)(7) or 1128(b)(7) or the Social Security Act (“SSA”) as they relate to the AKS.

1. Factual Background and Proposed Arrangement

At the “Requestor’s” multi-specialty physician practice, “Physician Employees” provide various services on behalf of Requestor, including services for which payment may be made under Federal health care programs, but excluding designated health services. Under the Proposed Arrangement, “when a Physician Employee performs outpatient surgical procedures at either of two ambulatory surgical centers (“ASCs”) operated by Requestor in a given calendar quarter, the Physician Employee would receive a bonus in the form of 30 percent of Requestor’s net profits from the ASC facility fee collections attributable to that physician’s procedures performed at the ASC for that quarter.”

2. The Law: Federal Anti-Kickback Statute

The AKS[1] makes it a criminal offense to knowingly and willfully offer, pay, solicit, or receive any remuneration (or anything of value) to induce, or in in return for, the referral of an individual to a person for any item or service reimbursable under a Federal health care program. The OIG noted that the “Safe Harbor Employee Exception” is potentially applicable to the Proposed Arrangement. Further, SSA statutory exception protects “any amount paid by an employer to an employee (who has a bona fide employment relationship with such employer) for employment in the provision of covered items or services.”[2]

3. Legal Analysis

Here, the AKS would not be implicated when the ASC procedures referred by the Physician Employees are reimbursable by a Federal health care program. Rather, the Arrangement would be shielded by the statutory exception and regulatory safe harbor exception because: (i) the Physician Employees would be bona fide employees of Requestor pursuant to the statutory definition; and (ii) the bonus compensation would constitute an amount paid by an employer to an employee for employment in the furnishing of any item or service for which payment may be made in whole or in part under Medicare, Medicaid, or other Federal health care programs, in accordance with the Safe Harbor Employee Exception.

The OIG contrasted the permissible Proposed Arrangement with an impermissible arrangement involving bonus payments to independent contractor physicians or nonemployees, as well as an impermissible arrangement where the physicians were owners of the ASCs and thereby paying themselves the proposed bonuses as “ownership distributions.”

4. Conclusion and Limitations

The OIG ultimately concluded that the Proposed Arrangement, if undertaken, would not generate prohibited remuneration under the AKS, and, accordingly, would not warrant sanctions under Sections 1128A(a)(7) and 1128(b)(7) of the SSA. The Opinion is limited in scope to the specific Proposed Arrangement under the AKS, and does not analyze the Proposed Arrangement under the Physician Self-Referral Law (Stark Law). The OIG specified that the Opinion is not to be relied upon by any person other than the Requestor. Though the Opinion may not be specifically relied upon for other arrangements, the reasoning stated therein should be kept in mind as a consideration when structuring a bonus or incentive plan for employees.

[1] 42 U.S.C. § 1320a-7b(b).
[2] SSA § 1128B(b)(3)(B).