OIG Issues Favorable Advisory Opinion for Certain Physician Employee Bonuses

On October 13, 2023, the U.S. Department of Health and Human Services Office of Inspector General (“OIG”) posted Advisory Opinion No. 23-07. In this opinion, the OIG responded favorably to a proposed arrangement whereby physicians employed by a multi-specialty physician practice would receive bonuses based on a percentage of net profits from the facility fees for outpatient surgical procedures performed by the applicable physician at practice operated ambulatory surgical centers (“ASCs”).

Of note, in this set of facts, the OIG specified that it relied on the practice’s certification that all of the applicable physician employees are “bona fide employees” of the practice, as defined in 26 U.S.C. § 3121(d)(2). Therefore, if a practice is looking to this opinion for guidance on how an employee bonus structure may be viewed by OIG, it is important to recognize the need to meet the definition of a bona fide employee and note that this opinion specifically addresses this limitation and others, including the following language excerpted from the opinion: 

We note that a similar arrangement involving bonus payments to 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) may raise fraud and abuse concerns under the Federal anti-kickback statute. Payment structures that tie compensation to profits generated from services furnished to patients referred by the compensated party are suspect under the Federal anti-kickback statute. Here, however, because the Proposed Arrangement would satisfy the statutory exception and regulatory safe harbor for employees, the remuneration exchanged under the Proposed Arrangement would not constitute prohibited remuneration under the Federal anti-kickback statute despite the potential risks of fraud and abuse this type of compensation generally could present.

Please visit OIG's website for a full copy of the opinion here.